SEOUL (Reuters) – Shares of South Korean carmaker SK Innovation Co Ltd rose Monday after burying the hatchet with LG Energy Solution, freeing both companies to expand into the United States, where electric cars have become a priority. Biden administration.
SK Innovation has agreed to pay its rival, an LG Chem Ltd unit, 2 trillion winnings ($ 1.8 billion) to drop all litigation in an acute trade dispute. This was much lower than expected, with some estimates raising settlement costs to 7 trillion won.
Its shares rose 15% more, while LG Chem shares also rose 1%.
The line had threatened a $ 2.6 billion Georgia plant that SK was building to supply Ford Motor Co and Volkswagen AG and was seen as the key to the growing industry.
SK promised last month to move away from the Georgia plant if a decision by the European Commission on International Trade in favor of LG Chem is not overturned.
The agreement “will allow us to accelerate the construction of the plant in Georgia, USA and actively promote additional investment and cooperation in line with the development of the US and global electric vehicle (EV) industry,” said SK Innovation CEO Kim Jun. employees seen by Reuters.
The US market is important for both companies because Chinese battery manufacturers, such as Contemporary Amperex Technology Co. Ltd. (CATL), do not have a foothold. Korean firms have also found it difficult to gain ground in China – the world’s largest market for electric vehicles – as Beijing has promoted policies to support domestic manufacturers.
“The US electric vehicle market is considered the place where South Korean electric battery manufacturers have the best impact for sustainable growth in the future,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
US President Joe Biden said in a statement that the settlement was “a victory for American workers and the US auto industry.” Both Ford and Volkswagen welcomed the agreement.
Volkswagen is a big customer for both Korean battery manufacturers and analysts, they said their long-term outlook will depend in part on how they respond to Monday’s German maker’s decision to move most cars its in a new unified prismatic battery and away from the bag-type battery in which they specialize.
SK’s main customers are Volkswagen and Hyundai Motor Co., while LG has a more diverse customer base, supplying both those automakers and General Motors Co. and Tesla Inc., analysts say.
LG says it plans to invest more than $ 4.5 billion in the United States to meet growing demand for electric vehicles and plans to build a second 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 LG Energy Solution President Kim Jong-Hyun in a message to employees.
(1 $ = 1,124,500 won)
Reporting by Heekyong Yang and Joyce Lee; Additional reporting by Jihoon Lee; Editing by Sayantani Ghosh and Edwina Gibbs