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| Hyundai Motor's Kona Electric / Courtesy of Hyundai Motor |
By Nam Hyun-woo
Hyundai Motor and LG Energy Solution (LGES) have reflected the costs for replacing the battery packs of more than 75,000 Kona electric vehicles (EVs) into their respective earnings for the fourth quarter of last year.
According to each company, Thursday, Hyundai Motor updated its fourth-quarter operating profit to 2.39 trillion won ($2.12 billion), down 386.6 billion won from the 2.78 trillion won it had posted in January.
Given the company has already allocated a provisional 38.9 billion won, the carmaker is assumed to be shouldering approximately 425.5 billion won of the total Kona EV recall cost.
LG Chem, the parent company of LGES, also stated its fourth-quarter operating profit has declined by 555 billion won after reflecting the recall costs. LGES did not reveal the exact amount of costs it reflected, but the company had said last year that it already factored in the cost of the recall.
Though the two sides did not clearly state the exact amount of costs they each will shoulder, sources said the total cost of the recall amounted to 1.4 trillion won, up from the initially anticipated 1 trillion won, and the two sides agreed on Hyundai paying 30 percent and LGES paying the remaining 70 percent.
Earlier in the week, Hyundai Motor and LGES agreed to file for a voluntary recall to replace battery packs of 81,701 Hyundai EVs powered by LGES' battery cells. Of them, 75,680 are Kona EVs, 5,716 are Ioniq EVs and 305 are Elec City buses. The two parties decided to recall them as 15 fires involving those vehicles have been reported.
Upon the recall, Korea's transport ministry hinted at the risk of fire due to manufacturing errors in battery cells, but LGES has denied the manufacturing errors were the direct cause of the fires.
"Through close cooperation, Hyundai Motor and LGES will make further efforts for prompt recalls and regain customers' trust," a Hyundai Motor official said.
LGES also said in a statement that the company will fully cooperate with the recall, but refused to comment over the total costs.
