Shares in South Korean car battery maker SK Innovation Co Ltd skyrocketed on Monday after burying the hatchet with LG Energy Solution, which freed both companies to expand in the United States, where electric cars have a Biden administration has become a priority.
SK Innovation has agreed to pay its rival, an LG Chem Ltd unit, 2 trillion won ($ 1.8 billion) to drop all litigation in a bitter trade dispute. It was much less than expected, and some estimates put the settlement cost at 7 trillion won.
Its shares rose 15% higher, while LG Chem also rose 1%.
The drive has threatened a $ 2.6 billion Georgia plant that SK is building to supply Ford Motor Co and Volkswagen AG and is seen as the key to the growing industry.
SK promised last month to walk away from the Georgia plant if a decision of the US International Trade Commission, which favored LG Chem, is not overturned.
The settlement will “enable us to accelerate the construction of the plant in Georgia, USA, and promote active additional investment and cooperation in line with the development of the US and global electric vehicle industry,” said Kim Jun, CEO of SK, said in a message to employees seen by Reuters.
The US market is important for both businesses, as Chinese battery manufacturers such as Contemporary Amperex Technology Co Ltd (CATL) do not have a foothold. Korean companies have also found it difficult to gain ground in China – the world’s largest electric vehicle market – because Beijing has pursued policies to support local manufacturers.
“The US EV market is considered to be the place where South Korean manufacturers of EV batteries have the best chance of growing sustainably in the future,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
U.S. President Joe Biden said in a statement that the settlement is a victory for U.S. workers and the U.S. auto industry. Ford and Volkswagen also welcomed the agreement.
Volkswagen is a major customer for both Korean battery manufacturers and analysts, saying their long-term outlook will depend in part on how they react to the German carmaker’s decision last month to move most of its cars to a new unified prismatic battery and move away from the pocket battery in which they specialize.
SK’s main customers are Volkswagen and Hyundai Motor Co., while LG has a more diversified customer base that caters to both car manufacturers, but also General Motors Co and Tesla Inc., analysts say.
LG said it plans to invest more than $ 4.5 billion in the United States to meet the growing demand from the EV, and is considering building a second battery joint venture in GM with Tennessee .
“We will play an active role in successfully expanding the range of batteries and electric vehicles through risky and preventative investments,” LG Energy Solution President Kim Jong-Hyun said in a message to employees.
($ 1 = 1,124,5100 won)
Reporting by Heekyong Yang and Joyce Lee; Additional reporting by Jihoon Lee; Edited by Sayantani Ghosh and Edwina Gibbs