South Korea’s LG Chem has suspended its plans to spin off an EV battery unit during the second half of 2020 on concerns of global uncertainties, unstable yield and ESS fires, according to industry sources on March 9. The LG affiliate had planned an IPO for the spin-off, but this too has been put on hold.
“LG Chem has been considering these plans to raise more capital for its battery business, but has recently decided to put off the plans amid the global economic conditions including the coronavirus situation,” said one source close to the matter. He added that LG Chem was also concerned about the time needed for mass production and its declining earnings.
Adding to the problems is that most of the raw materials for the batteries are still sourced overseas. LG Chem would also have to struggle with the narrow margins set by car makers; the company has currently set the battery prices supplied to Volkswagen’s Modular Electric Drive platforms at USD100 - 120 per 1kWh. This is lower than the average EV battery price of USD 135 estimated for this year.
Some industry sources said LG Chem may come up with other means for raising capital. In December 2019, the LG company had signed a 5-year plan with major local financial institutions including Korea Development Bank for up to USD 5 billion of investment to cover its overseas investment.
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