SK On and Hyundai Motor sign MOU on U.S. battery supply

Industry

Published: 29 Nov. 2022, 16:00 Updated: 29 Nov. 2022, 16:55

SK On and Hyundai Motor sign MOU on U.S. battery supply

Kim Heung-soo, left, head of the corporate future growth planning division at Hyundai Motor, and Choi Young-chan, chief administrative officer at SK On, take a photo after signing a battery supply agreement on Tuesday at SK headquarters in central Seoul. [HYUNDAI MOTOR]

SK On will supply batteries to Hyundai Motor’s Georgia plant starting in 2025.

Hyundai and SK On signed a memorandum of understanding Tuesday, with Kim Heung-soo, head of the corporate future growth planning division at Hyundai Motor, and SK On Chief Administrative Officer Choi Young-chan in attendance.

Under the agreement, SK On batteries will be supplied to Hyundai Motor for electric vehicles (EVs) that will be manufactured at the Georgia plant. The automaker is currently building the plant, its first EV-dedicated facility, with the goal of starting mass production in 2025.

Details of the deal have not been settled yet, according to both companies. They may build a joint battery plant or Hyundai Motor may source batteries that SK On makes at existing plants in the United States.

A bird's-eye view of Hyundai's Georgia plant [HYUNDAI MOTOR]

SK On already owns a plant in Georgia, and is currently building its another one in the state. The second is expected to start production in 2023.

More details, including the size of the deal, will be discussed later, Hyundai said.

"With the latest cooperation and stable supply, we anticipate to taking the lead in the market," Hyundai's Kim said.

The latest agreement comes as part of efforts to meet the requirements to qualify for the EV tax rule on the Inflation Reduction Act (IRA).

Under the terms of the IRA, buyers of EVs assembled in the United States are eligible for a $7,500 tax credit for vehicles purchased after Aug. 16, 2022, extending an existing program that offered a $7,500 tax credit for EV purchases regardless of origin.

After Jan. 1, 2023, content requirements for batteries begin to phase in over a number of years. In 2023, 40 percent of critical-mineral value will have to come from the United States or countries with which the United States has a free trade agreement to qualify for $3,750 of the credit. That number increases 10 percentage points a year to 80 percent in 2027.

Fifty percent of battery-component value will have to come from the United States to qualify for another $3,750 of the tax credit. That number will increase 10 percentage points a year to 100 percent by 2029. To qualify for the subsidy, a vehicle must be completely free of Chinese-made components from 2024 and free of Chinese critical minerals from 2025.

Critical minerals include lithium, cobalt, nickel, tin, tungsten and graphite, while components include cathodes, anodes, electrolytes and separators made with those minerals.

BY SARAH CHEA [chea.sarah@joongang.co.kr]