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| Firefighters put out a fire on an electric bus near Changwon, South Gyeongsang Province, Feb. 15. The bus, a Hyundai Elec City, was equipped with LG Energy Solution's battery packs. Courtesy of Changwon Fire Department |
By Nam Hyun-woo
Hyundai Motor is planning to replace all batteries for its Kona electric vehicles (EVs), after a series of fires last year, but no visible progress has yet been made with LG Energy Solution (LGES) over responsibility for the fires and replacement costs estimated at 1.5 trillion won ($1.36 billion).
Industry officials said talks between the two firms are getting protracted as Hyundai Motor wants to replace batteries for all its Kona EVs sold worldwide, while LGES only wants to replace the batteries of vehicles sold in Korea. Since the range of the additional recall could possibly sway the outcome of LGES's upcoming initial public offering (IPO) and Hyundai's electrification strategy, the confrontation is anticipated to continue, they said.
According to sources at Hyundai Motor, Sunday, the company had planned to apply for an additional recall on Kona EVs to the Ministry of Land, Infrastructure and Transport, Friday, to replace their batteries, but decided to delay the application.
Since October last year, Hyundai Motor has been recalling 77,000 Kona EVs across the world after a number of vehicles caught fire. More than 10,000 Ioniq EVs and 400 Elec City electric buses using the same battery, produced by LG Energy Solution, were included in the initial recall. Hyundai Motor has been updating the battery management system (BMS) of the recalled vehicles, without defining the root cause of the fires.
The sources said Hyundai Motor was currently deciding on whether to replace batteries for Kona EVs sold globally after launching the additional recall in Korea, but the plan has been put on hold.
The carmaker decided to apply additional measures to the vehicles after a Kona EV caught fire in Daegu, Jan. 23, even after its BMS had been updated and an Elec City bus also burned in South Gyeongsang Province, Feb. 15.
The transport ministry said in October that it suspected potential manufacturing errors as the cause of the fires, but LGES flatly denied this, saying it and Hyundai had failed to replicate the same fires during review tests. Since then, the ministry has been continuing an investigation into the fires.
At the time, Hyundai Motor was also seen to be siding with LGES's claim, after instituting updates to the BMS, which was designed by a Hyundai affiliate.
The cost for replacing the batteries is 20 million won per a vehicle. If Hyundai Motor decides to replace batteries for all 77,000 Kona EVs that were included in the first recall, the cost would reach 1.54 trillion won. Depending on the cause of the fires, the cost borne by Hyundai Motor and LGES is yet to be determined.
During a conference call last month to announce its fourth quarter performance, LG Chem, LGES's parent company, said it had already set "a certain amount as a provision for the Kona recall," adding that "though the cause is yet to be determined, we expect additional provision will be limited." The comments were interpreted as LGES dropping hints at further discussions with Hyundai Motor over sharing the costs for battery replacements.
Additional costs for this would be a factor affecting LGES's corporate value before its IPO ― currently estimated at 10 trillion won.
