SKI Power Lithium Battery Ambition and Crisis

In spite of the shortage of funds and continued losses in the battery business, it is still difficult to stop SKI's ambition to increase the power lithium battery business. Foreign media reported that SKI received a US$500 million (approximately RMB 3.2 billion) loan from the Export-Import Bank of Korea, which will be used to build its second power lithium battery plant in Hungary. The plant will begin large-scale delivery of batteries to European carmakers next year, with an annual output of 10GWh, which can be expanded to 16GWh in the future. In January of this year, SKI also announced that it will establish a third battery plant in Hungary with a planned output of 30GWh. It is planned to start construction in the third quarter of 2021 and complete it in 2028. With the addition of the 7.5GWh of the first plant, SKI's battery output in Europe will exceed 50GWh after the completion of the above plant. In addition to European plants, SKI is also increasing investment in its American battery plants. SKI has invested 2.6 billion U.S. dollars (about 17 billion yuan) to build two battery plants in the United States, with a total output of more than 20GWh. Among them, the first-phase output of the first battery plant in Georgia, USA is 9.8GWh, and mass production is expected to be realized in 2022. The second US plant has also started and is expected to be put into operation in 2023, with a planned output of 11.7GWh. At the same time, SKI also announced plans to establish a joint venture with Ford to build a plant in the United States to produce batteries and modules for Ford electric vehicles, with an annual output of 60GWh. Behind SKI's continuous increase in its battery business investment, the important purpose is to meet the rising global demand for power lithium battery market, provide nearby supporting services for its international customers and improve its supply capacity, thereby enhancing its presence in the global power lithium battery market Competitiveness. In addition, the profitability of European battery factories also gives SKI the confidence to continue to increase the supply of European battery business. SKI's performance report shows that the sales of its Hungarian battery subsidiary SKBatteryHungary (SKBH) in 2020 increased from 1.7 billion won in 2019 to 357.2 billion won (approximately 2.09 billion yuan), an increase of 210 times; operating profit reached 690 million South Korean won, compared with the loss of 19.5 billion won a year ago, has turned losses into profits. In 2021, SKI's power lithium battery business will further increase. From January to March, battery sales increased by 80% year-on-year to 526.3 billion won (about 3 billion yuan), but operating losses expanded to 176.7 billion won (about 1 billion yuan). Data show that in the first quarter of this year, SKI's global power lithium battery installed capacity was approximately 2.4GWh, an increase of 108.6% year-on-year, and its market share was 5.1%, ranking sixth. SKI said that so far it has received 600GWh power lithium battery orders, which are estimated to be worth about 80 trillion won (about 458.5 billion yuan). In order to meet market demand, SKI is accelerating its production expansion and plans to increase its global battery production to 85GWh in 2023 and to over 125GWh by 2025. At present, SKI's customers are Volkswagen, Ford, Daimler, Hyundai and Kia, etc., and are actively exploring other customers. SKI power lithium battery products only have soft-pack batteries, but they are also developing new types of batteries, including cylindrical and square batteries, with the purpose of enriching its product matrix to meet the electrification requirements of different OEMs. At present, international OEMs including Volkswagen, BMW, and Tesla are increasing the introduction of square and cylindrical batteries, and there is a strong demand for these batteries. SKI currently only has soft package products, which will inevitably affect its power lithium battery business. Further development. At the same time, in order to further enhance the competitiveness of its products, SKI is speeding up the mass production of its cobalt-free batteries, and is now ready to mass produce new batteries with a nickel content of 90%, and is waiting for orders from automakers . In addition, in order to better develop its power lithium battery business, SKI is considering divesting its electric vehicle battery business from a financial point of view, and it may be an independent IPO in the future. On the whole, SKI is enhancing the comprehensive competitiveness of its power lithium battery business from multiple levels, sprinting to the top three in the world's battery installed capacity, making no secret of its battery business ambitions. However, behind the rush of the power lithium battery business, SKI is also facing tremendous pressure and challenges, and it remains to be seen whether it can achieve its set goals. On the one hand, SKI is facing greater financial pressure as a whole, and it is difficult to provide strong financial support for its power lithium battery business, and SKI agreed to pay 2 trillion won (approximately RMB 11.7 billion) in compensation to LG New Energy. It also made its already loss-making power lithium battery business worse. On the other hand, head battery companies including CATL, LG New Energy, Panasonic, and Samsung SDI are currently increasing investment in their power lithium battery business and competing for international customers, which has caused tremendous impact and pressure on SKI. At the same time, OEMs are also accelerating the pace of self-built battery factories to reduce their reliance on battery suppliers for procurement, which will also squeeze some of the market space of SKI.