South Korean battery makers SK Innovation and LG Chem have agreed to a $1.8 billion dispute settlement over EV battery technology which led to a rise in the shares of the companies.
After the central conflict challenged American Ford Motor and Volkswagen AG’s EV plans, LG Energy Solution, a wholly-owned subsidiary of LG Chem, and SK Innovation decided to abandon all litigation in the US and South Korea and not to sue each other for ten years.
SK Innovation’s stock increased by 18.5 percent, while LG Chem’s stock soared by 4.1 percent.
SK Innovation Chief Executive Officer Mr. Kim Jun remarked that “this agreement has resolved uncertainties about the growth of the battery business and our pursuit of the US market. It will enable us to accelerate the construction of the Georgia, US plant and actively promote additional investment and cooperation in line with the development of the US and global electric vehicle (EV) industry.”
Ford stated that it was pleased that the battery manufacturers had resolved their differences and that the agreement would enable the automaker to concentrate on supplying EVS to retail and fleet customers.
Mr. Cho Hyun-ryul, an analyst at Samsung Securities pointed out that “the agreement is positive for both companies’ stock prices, by resolving the lawsuit issue for the future. For SK, the value of its battery business had been reflected less in its stock price versus competitors. However, this deal with LG could serve as leverage.”
Since February, when the US International Trade Commission sided with LG Chem in the trade secrets case, SK Innovation shares have dropped 19.7 percent, while LG Chem shares have fallen 15.4 percent.
Analysts said the companies’ ability to avoid lawsuits was contingent on how they reacted to Volkswagen’s decision last month to switch the majority of its vehicles to a new unified prismatic battery, rather than the pouch-style batteries made by LG and SK, though Volkswagen’s change does not imply that other automakers would follow.
Mr. Kang Dong-jin, an analyst at Hyundai Motor Securities added that “especially for SK, which is highly dependent on pouch-style batteries, the key is how it will win orders in the future. Although there are no public numbers, SK is known to be quite dependent on Volkswagen for the battery business.”
Related: Electronics giant LG to calls off its loss-making mobile phone business
