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SK On and Hyundai Motor Group, Korean juggernauts helping drive the future of the electric-vehicle transition, are doubling down in Georgia with a joint-venture battery plant, a new partnership within the state by two of its single largest investors in their own right.
The plant will be located in Bartow County, northwest of Atlanta, and will be separate from the battery plant that Hyundai is building as part of its $5.5 billion plant in Bryan County near Savannah.
The plant will supply batteries for electric Hyundai and Kia models planned for production in Georgia and Alabama. SK On, the fifth largest battery supplier int he world, already provides the batteries for the Hyundai IONIQ 5 and IONIQ 6 and the Kia EV6, all of which are currently made in Korea.
The Bartow County plant’s final investment will clock in at between $4-5 billion, according to Gov. Brian Kemp’s office, which announced the project Thursday. Officials estimated the jobs impact at 3,500, meaning another massive incentive package could be on the way. The plant would be the third-largest single investment in Georgia behind the announced Rivian and Hyundai EV plants.
Hyundai and SK On signed an MOU on battery development in November, with SK On noting that it had secured lithium deals in Chile and Australia to comply with rules that battery raw materials be sourced from the U.S. free-trade partners.
“Through the EV battery MOU, we will be able to further accelerate U.S. market EV growth,” said Hyundai Motor Executive Vice President Heung-soo Kim, in a release. “We expect the stable supply of EV batteries from SK on will enable us to focus on securing EV leadership in the U.S. market.”
Tax-Credit Tensions Persist
The announcement comes at a touchy time in the U.S.-Korea dialogue over EVs and the batteries that power them, with implications for the bilateral trading relationship that has helped Georgia win $17 billion in EV-related commitments since 2020.
Economic Development Commissioner Pat Wilson called Hyundai and SK “pioneering partners” in the state’s EV push and welcomed their collaboration.
“By supporting cooperation and partnerships across our growing EV ecosystem, we’re creating a fully integrated supply chain for automotive OEMs while also connecting battery manufacturers with recyclers to close the loop on battery manufacturing,” Mr. Wilson said.
Korean companies and officials have voiced concern over the Inflation Reduction Act, the $369 billion climate and energy bill signed in August by President Biden, which many say advances automotive electrification at the expense of some of the very companies that are driving the industry’s shift.
At the core of the dispute is the $7,500 tax incentive that consumers get when purchasing EVs.
As of the IRA’s signing on Aug. 16, 2022, that incentive no longer applies to vehicles for which “final assembly” was conducted outside North America.
The exclusion — Hyundai, Kia and even European trade negotiators have argued — makes these foreign-made vehicles more expensive relative to North America-made cars, limiting consumer choice and stymying the very transition the IRA aims to support.
Batteries also play a role in each EV maker’s ability to notch the full $7,500 credit. Immediately after the IRA’s passage, half of the credit ($3,750) became contingent on the sourcing of at least 40 percent of battery components from North America, a percentage that ratchets up by 10 percent a year until it reaches 80 percent by the end of 2026.
The other half is based on the sourcing of critical minerals — raw materials like lithium, nickel, graphite, and cobalt — starting at 40 percent in North America or FTA countries (including both mined and recycled metals) and increasing by 10 percent a year until a 100 percent requirement comes into effect starting in 2029. See here a simple diagram and explanation of the provisions and timeline
This is a major issue for battery companies like SK which still get much of their supply from China, said Woongchul Choi, a professor in the automotive engineering department at Kookmin University in Seoul.
Dr. Choi spoke at a Dec. 7 symposium and gala dinner hosted by the Southeast U.S. Korea Chamber of Commerce and the Consulate General of Korea in Atlanta.
Dr. Choi gave a presentation on the history of electric vehicles from the 1800s onward, saying they were adopted first but were doomed by high prices relative to the gas-powered models churned out by Henry Ford’s assembly line.
That same concern remains today, as EVs have yet to reach a scale that reduces cost to the point of affordability for average consumers.
Batteries still make up the largest single cost of the vehicle, and half of the battery’s cost is the cathode materials largely source from abroad, Dr. Choi said. Australia dominates lithium production, as does Indonesia for nickel and the Democratic Republic of the Congo for cobalt.
Production and processing of materials, cell components and battery cells is dominated by China, which also produces 60 percent of the rare earth minerals required by the preferred motors used in electric propulsion, he said.
SK On, which already operates one $2.6 billion plant in Commerce and will start production on a second one in early 2023, is bringing production to the U.S. as fast as it can, but Dr. Choi said raw materials are still a bottleneck.
“I don’t know where they’re going to buy those materials other than China, except if they pay double or triple the money,” he said.
Reviving mining in the U.S., he said, takes time and creates its own environmental impacts, while recycling, another possible route, remains expensive and largely unproven at scale.
“Whatever we do, the important thing is a reasonable amount of grace period is required,” he said, noting that battery companies should have been granted a transition period to comply with the IRA. “That’s really the point: We need a little bit of time.”
U.S. Sen. Raphael Warnock, months before defeating Republican Herschel Walker in a tight runoff this week, introduced a bill that would phase in the North American final assembly requirement for companies investing in U.S. plants — a move that would directly benefit Hyundai, which broke ground on its Bryan County Meta Plant in October. Two major suppliers totaling $1.3 billion in investment have since announced locations nearby.
The SK/Hyundai battery facility will likely be located in the Bartow Centre, a zoned manufacturing and industrial site located on Highway 411.
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Editor’s note: This post was updated from an earlier version originally published Friday morning.