SK On recorded a surprise profit in the third quarter of last year, achieving a turnaround in momentum, but is estimated to have fallen back into the red in the fourth quarter. This is due to the poor sales of upstream electric vehicle manufacturers and a decline in battery prices. The sales volume from SK On's U.S. battery joint venture plant, which is set to begin operations this year, is expected to play a crucial role in improving its performance.
According to the battery industry and securities analysts on the 13th, SK On is estimated to have recorded an operating loss of 100 billion to 200 billion won in the fourth quarter of last year. Previously, SK On reported an operating profit of 24 billion won in the third quarter of last year, marking its first operating profit since its incorporation in October 2021, after 12 quarters.
Analysis has emerged that SK On's turnaround to profit in the third quarter was merely a temporary phenomenon and that its revenue structure has not fundamentally improved. Jeon Yu-jin, a researcher at iM Securities, noted, "The profit in SK On's third quarter last year was influenced by the alleviation of fixed cost burdens related to the initial operations of the Hungary plant in the previous second quarter and some one-off gains reflected in the settlement process with major clients." The researcher added, "In the fourth quarter of last year, while sales would increase due to rising orders from North American clients and the expansion of the Advanced Manufacturing Production Credit (AMPC) from the U.S. government, it is likely that SK On will again turn to a loss as large one-off gains disappear."
Recently, SK On's plant utilization rate is the lowest among the three domestic battery companies. According to the third quarter of last year, SK On's average utilization rate across domestic and overseas plants was 46.2%, not exceeding half, and there are estimates that it may have fallen to the 30% range in the fourth quarter.
The decline in battery prices is also adversely affecting performance. According to Yuanta Securities Korea, the provisional battery export price in the fourth quarter of last year was $36,086 per ton, a decrease of about 10% compared to the previous quarter ($40,095).
To recover its revenue, SK On is expected to focus on the operational performance of its joint venture plants in the U.S., which are scheduled for completion this year. SK On will begin commercial operations at three locations this year: the Ford joint venture Blue Oval SK's Kentucky Plant (37 GWh) and Tennessee Plant (43 GWh), and the Hyundai Motor joint venture plant in Georgia (35 GWh). The current production capacity in the U.S., which stands at 22 GWh, is expected to increase more than fivefold in one year.
The five models equipped with SK On's batteries, including Hyundai Motor Group's Ioniq 5 and 9, Genesis GV70 electrified models, and Kia EV6 and 9, were selected as vehicles eligible for consumer subsidies of up to $7,500 (approximately 11 million won) from the U.S. government under the Inflation Reduction Act (IRA) earlier this year. Additionally, Ford's F-150 Lightning and E-Transit were also selected as subsidy-eligible models, which is expected to create favorable conditions for increased sales.
If the sales of Hyundai Motor and Ford's electric vehicles increase in the U.S., the tax credit benefits for SK On, which produces and supplies batteries locally, will also grow. Under the IRA, the U.S. offers a tax deduction of $35 per kilowatt-hour (kWh) for cells and $10 per kWh for modules produced and sold within the country.
However, the announcement by the incoming Donald Trump administration on the 20th to potentially reduce or eliminate electric vehicle subsidies is a factor that increases business uncertainty. There are concerns that the disappearance of consumer subsidies could lead to prolonged demand weakness for electric vehicle purchases.
An industry official noted, "Considering the widely built battery plants in the Rust Belt (Midwest and Northeast U.S.) and Sun Belt (South), it would not be easy for the incoming administration to abolish electric vehicle subsidies."