SEOUL (Reuters): Shares of South Korean car battery maker SK Innovation Co Ltd skyrocketed on Monday after burying the jacket with LG Energy Solution, freeing the two companies to expand into the United States, where electric cars have become a priority of the Biden administration.
SK Innovation agreed to pay its rival, a unit of LG Chem Ltd, 2 trillion won ($ 1.8 billion) to withdraw all litigation in a bitter trade secrets dispute. This was much lower than expected, with some estimates placing settlement costs at 7 trillion won.
Its shares soared 15% more, while those of LG Chem also rose, up 1%.
The row had threatened a $ 2.6 billion Georgia plant that SK is building to supply Ford Motor Co. and Volkswagen AG and is considered key to the growing industry.
SK had promised last month that it would move away from the Georgia plant if the U.S. International Trade Commission’s decision in favor of LG Chem was not overturned.
The agreement “will allow us to accelerate the construction of the plant in Georgia, USA and actively promote additional investments and cooperation in line with the development of the American and electric vehicle (EV) industry,” the minister said in a message. SK Innovation delegate, Kim Jun. to employees seen by Reuters.
The US market is important for both companies, as Chinese battery manufacturers, such as Contemporary Amperex Technology Co. Ltd. (CATL), have no support. Korean companies have also struggled to gain ground in China, the world’s largest market for electric vehicles, as Beijing has pushed for policies to support domestic manufacturers.
“The U.S. electric vehicle market is considered the place where South Korean electric vehicle battery manufacturers have the best impetus for the sustainable growth of the future,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
U.S. President Joe Biden said in a statement that the deal was “a victory for American workers and the U.S. auto industry.” Both Ford and Volkswagen also congratulated the deal.
Volkswagen is a big customer for both Korean battery manufacturers and analysts, who said their long-term prospects will depend in part on how they will respond to the German manufacturer’s decision last month to move most of its cars. to a new unified prismatic battery away from the bag-style battery in which they specialize.
SK’s main customers are Volkswagen and Hyundai Motor Co., while LG has a more diversified customer base, supplying both these carmakers as well as General Motors Co. and Tesla Inc., according to analysts.
LG has said it plans to invest more than $ 4.5 billion in the United States to meet the growing demand for electric vehicles and is considering building a second battery joint venture in Tennessee with GM.
“We will play an active role in successfully expanding the supply of batteries and electric vehicles through bold and preventive investments,” said Kim Jong-Hyun, president of LG Energy Solution, in a message to employees.
(1 $ = 1,124,500 won)
Reports by Heekyong Yang and Joyce Lee; Additional reports from Jihoon Lee; Editing by Sayantani Ghosh and Edwina Gibbs