SK Innovation, well known in automotive circles but not yet a brand name in Georgia, is making a huge bet not only on Americans’ appetites for plug-in hybrid and fully electric vehicles, but also on the Peach State.
On Tuesday morning, the battery division of Korean conglomerate SK Group is scheduled to hold a ceremonial groundbreaking on Georgia's largest economic development win – by jobs and total investment -- since Kia Motors opened its factory in West Point a decade ago. SK Innovation plans a sprawling lithium-ion battery factory in Jackson County, about 65 miles northeast of downtown Atlanta, where the company says it will invest nearly $1.7 billion and hire 2,000 by 2025.
SK Innovation President and CEO Jun Kim told The Atlanta Journal-Constitution his company will hire engineers, quality control experts, assembly workers and corporate staff as it creates its first U.S. factory. Volkswagen, which has a factory in Chattanooga, will rely on SK to supply batteries for electrified cars in North America, but the company sees the booming automotive manufacturing industry in the Sun Belt, which largely consists of Asian and European brands, as potential customers.
In a nearly hour-long interview, Kim discussed the factory, the future of electric vehicles and why SK needed to be in the United States. This interview has been edited for clarity and length.
Q: Why did you decide you need to be in the United States and what does this factory mean for the business?
A: "That's a simple question to answer, I think. The reason we decided to build a factory in the United States is because of the demand and ... because one of the vendor requirements (of automakers in the U.S.) is to get a stable supply (of components) from local manufacturers, local suppliers."
Q: Why did Georgia make the most sense for this project?
A: "First of all, the location itself is quite attractive because of the concentration of global (automakers) around this area in the so-called eastern Sun Belt, and that includes Tennessee, Alabama, South Carolina and Georgia. As you might know, Volkswagen is doing business in Tennessee; Alabama is home to companies like (Mercedes-Benz parent company) Daimler and Hyundai; South Carolina also has facilities for Daimler, Volvo and BMW; and there is Kia Motor Co. in Georgia as well. Slightly up north, there are other companies like Ford. This is where the demand is concentrated."
Q: If you had your pick of all these other states -- and I'm sure you did -- why Georgia?
A: "The tax benefits offered by different states were pretty much similar. But there were other factors than just tax benefits that were weighed quite heavily on our decisions.
“...Among the candidate cities of course, our working level staff visited many places and shared their findings with me, and I felt myself when I came to Georgia for the first time back in January that the professionalism of the state of Georgia officials and the Jackson County officials and also the people in the municipal government in the city of Commerce were indeed impressive and striking. I literally felt the passion that people had at creating a business-friendly environment and developing their local communities.
“Since we’re not planning to do business for one or two years in the easiest places and just exit, our plan is to find a place we could grow together with the community as a part of the community. The selection of the location was more of a process of deciding who we wanted to work with.
“This is backed by more objective findings of other sources. According to a survey of CNBC, the state of Georgia has been selected as one of the best states to do business in the United States for six years in a row.
“…Another important factor was labor environment. …We estimate that by 2025 over 2,000 people will have been employed and having the right employment environment was very important for us. The state of Georgia stood as a more favorable condition on that front as well.”
"I'm sure you are aware of the QuickStart program. (QuickStart is a celebrated state workforce training program designed to help companies rapidly hire and train workers.)
“…I was so impressed that I actually got to thinking of adopting the QuickStart program to other places we are building production facilities, namely Hungary and China. We’re building factories there as well.
“…So actually, we offered an exchange – cross bench-marking opportunities – between Hungarian local government and the state of Georgia and the nearby local governments.”
Q: Can you describe the types of batteries you will be building in Georgia and what types of vehicles these will be used in?
A: "The initial activities of the plant in Georgia will be supplying Volkswagen electric vehicles, and more specifically our batteries will be fitted with the Volkswagen pure EVs in the United States. But our battery product can be fitted with any type of electric cars, it can be hybrid or pure electrics.
“To be clear we can produce different types of batteries that can be supplied to hybrid vehicles or pure electric cars. But that said our focus in the Georgia plant will be developing and producing batteries for pure electric cars because they’re considered more high-tech.”
Q: Your first customer is going to be VW, will there be other customers initially or that you expect over time?
A: "We expect."
Q: Perhaps Kia and Hyundai, which are nearby? BMW is down I-85 in Spartanburg, S.C., and Volvo isn't far away in South Carolina.
A: "We are discussing those companies, but most importantly it was the potential demand from these (automakers) that helped us determine Georgia as the location for this production facility. Whether it be from BMW or Volvo or Ford, if we get to win the orders from these (automakers), Georgia will be the production base for that supply.
“The initial construction of our plant in the state of Georgia will be for a 10-gigawatt production capacity and it will primarily serve Volkswagen, however, the fact we have secured in that place (enough land) it can actually accommodate a facility of up to 50 gigawatts of production capacity.”
Q: There's space potentially, if everything lines up, for you to go to five times the initial manufacturing capacity?
A: "Yes."
Q: Is that a reflection of what you believe to be the potential market demand for electrified vehicles?
A: "That's right."
Q: How would you describe the potential for that demand?
A: "It's difficult to give a definite number and forecast that. But so far, the EV market has been growing much more rapidly than expected and I think this trend of rapid growth or more rapid growth than projected will continue in the future.
“…First of all, I can say the existing driver for the EV market has been environmental regulations of different countries. However, starting from the second half of 2017 or the first half of 2018 the (automakers) started very aggressively ordering EV batteries.
“Volkswagen and other global (automakers) coincided their global rolling out of EV-dedicated platforms with increasing the volumes of the orders for EV batteries. In the past they were building electric cars in response to regulatory requirements. However, I think this switch in their actions had to do with their convictions for quicker than expected commercialization and deeper penetration of e-mobility.
“The core concept of e-mobility is often summed up in four letters – CASE.
“Connectivity. Autonomous. Sharing. And lastly, E stands for electrification. Without electrification, all of these three technologies cannot be properly converged.
“The impression I get when I go to different motor shows and even big industrial exhibitions like (the Consumer Electronics Show) is the concept of future cars, that used to be a bit more distant in the past, feels much more closer and closer to reality on the merits of electric vehicles. …In the past, internal combustion vehicles used to be a mere means of transportation, but in the future, electric cars will be a deliverer of a completely different lifestyle. Simply, we’re going to live in a world where we don’t need to put our hands on the wheel.”
Q: Your car might be your living room on wheels?
A: "Yes."
Q: The demands on batteries from electrification and moving the vehicle from Point A to Point B becomes even more intense, particularly with autonomous vehicles. It'll power your electronic devices while you work or watch a movie. That puts more burden on the batteries you're building.
A: "Exactly. That's why the different (automakers) see a massive potential and business opportunities around the electric car in the future and (automakers) are now at a juncture where they cannot not choose that path. The potential is so immense.
“One of the key strengths of the U.S. market in the potential of the EV is found in Silicon Valley. Silicon Valley is leading the whole advancement of the core technologies and all different related business models. That’s where these ideas are developed ahead of others and are tested.
“That’s is why I think the conversion from internal combustion or IC to EV in a greater scale is going to come quite earlier than expected in the United States.
“Especially when this trend is combined with the ability of battery makers to supply and fulfill the large-scale orders for the global (automakers). I think in 2022 or 2023 at latest, the production costs of the EV will be actually lower or at least overtake the production costs of (internal combustion vehicles).
“Of course, on top of that, what’s already happening is the total operating cost and maintenance of EVs is already cheaper than IC vehicles, but what I’m saying is the total production costs for EVs is going to become cheaper without (government) subsidies.”
Q: If you've got 50 gigawatts of potential production capacity, is that five times as many jobs as well?
A: "I think if the capacity grows to the 50-gigawatt level, the total number we would employ would be about 5,000 to 6,000."
Q: If cost of production of electric vehicles goes below the cost of internal combustion vehicles, will we see in the not too distant future consumers are primarily driving electric vehicles?
A: "Internal combustion vehicles will not go away but I think by 2030 about 30 to 35 percent of the (newly sold) cars on the road will be electric cars."
Q: In the U.S., President Donald Trump has tried to push foreign companies to do more of their business in the United States and for foreign countries to buy more U.S. goods. Are the efforts by the Trump administration factored into this decision to build a factory in Georgia?
A: "My answer is no. As I said earlier, one of the key vendor selection requirements and the supply requirements for global (automakers) is the suppliers' ability to supply from the local production base.
“Quite simply, the way to understand the dynamics is if we won an order to supply (batteries) for cars in the United States, then we need to produce in the United States. The same can be said for the European market and China. If the orders are for those markets, then we have to produce there.
“However, I do feel that global (automakers), unlike battery manufactures like us, might be affected. The decisions by those (automakers) might be affected by Mr. Trump’s policies. Nonetheless, the U.S. market is a very attractive market for the (automakers). It’s one of the most important car markets in the world. The size is incomparable. The EV market growth is taking place at a faster rate than expected.”
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