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By Joseph White, Hyunjoo Jin and Heekyong Yang
SEOUL (Reuters) – SK Innovation Co Ltd is in talks to set up joint battery manufacturing companies with Volkswagen AG and Chinese partners, the South Korean petrochemical producer aggressively reinforcing its involvement in electric vehicles.
The company confirmed for the first time talks with the German group Volkswagen, telling Reuters that the couple were discussing the construction of a factory. He also said that he was about to agree to build a factory in China with undisclosed partners.
The talks come as battery manufacturers for electric vehicles increase their ability to cope with a growing demand, while automakers struggle to develop vehicles operating with non-gasoline means to comply with the increasingly stringent regulations in terms of emissions.
SK Innovation, South Korea's largest oil refiner, is a latecomer to a market run by its compatriots LG Chem Ltd and Samsung SDI Co Ltd, as well as Japan's Panasonic Corp.
"Compared to our rivals, we match or exceed investments in the region since last year," said YS Yoon, president of SK Innovation's battery business, in an interview. "We tried to find the right moment for a mbadive investment."
SK, South Korea's third-largest conglomerate, is increasingly interested in electric vehicle batteries, as demand for the memory chip manufacturing facility slows down SK Hynix Inc.
In 2022, SK Innovation plans to spend 4.51 billion won (3.03 billion pounds sterling) to increase the capacity of its batteries. Last month, a US $ 1.7 billion plant in the United States focused on supplying lithium-ion battery cells to Volkswagen. He also builds two factories in Hungary.
"Our strategy is to keep up with technological change by maintaining relationships with some of our key customers," Yoon said, adding that "nothing has been decided" regarding a joint venture with Volkswagen.
The joint venture will be the first in which Volkswagen, one of the world's largest car manufacturers, will co-invest in battery production, as the joint investment in Panasonic batteries and the US battery Tesla electric vehicles Inc., badysts said.
"We plan to invest in a battery manufacturer to strengthen our electrification offensive and develop the necessary know-how," Volkswagen said in a statement to Reuters.
In March, Herbert Diess, managing director of Volkswagen, said that the manufacturer "closely examined the possibility of a possible participation in battery cell manufacturing facilities in Europe".
Other Volkswagen suppliers include LG Chem, Samsung SDI and the contemporary Chinese company Amperex Technology Co Ltd.
"There are so many battery needs from Volkswagen," Yoon said. "So I think it's natural that Volkswagen has several suppliers, even if it has joint ventures with some."
Second factory of China
In addition, SK Innovation plans to sign an agreement soon for the construction of its second battery plant for electric vehicles in China, the world's largest market for electric vehicles, said Yoon, without identifying local partners.
The company started its work in August on its first Chinese joint venture site with Beijing Electronics Holding Co Ltd and BAIC Motor Corp. Ltd., with investment reaching 5 billion yuan ($ 744.30 million) from the previous year. by 2020.
SK Innovation's objective was to start construction in 2016, but was postponed as electric vehicles with Korean batteries were not on the list of electric vehicles eligible for a government subsidy.
"We hope the Chinese market will open in 2021," said Jay Rhee, research and battery development manager at SK Innovation, when the subsidies were removed.
COBALT CULL
Meanwhile, SK Innovation is in the industry race to reduce the cobalt content of batteries. Panasonic in May reported working on a cobalt-free battery. The ore is mined in difficult conditions and subject to significant price fluctuations.
The company plans to start producing batteries containing 5% cobalt in 2022, up from 10% at present, Rhee said.
Cobalt is mainly mined in the Democratic Republic of Congo, but SK Innovation also supplies cobalt to Australia and mines the ore from used batteries, Yoon said.
"I think we will not need to get fresh cobalt after 2025," Yoon said.
(Report by Joe White, Hyunjoo Jin and Heekong Yang, additional story by Edward Taylor in FRANKFURT, edited by Christopher Cushing)
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