A 1 trillion won battery recall triggered by a fire in Hyundai’s electric vehicles including Kona.
Hyundai Motor Company and LG Energy Solutions have agreed on how to share the cost of replacing batteries in the range of KRW 1 trillion.
It is known that LG Energy Solutions will cover 30% of Hyundai Motors and 70% of it.
It seems that LG’s responsibility for the battery fire is relatively greater.
Hyundai Motors 425.5 billion… LG Chem is 600 billion units
Hyundai Motor Company revised and disclosed last year’s annual operating profit from KRW 2,781.3 billion to KRW 2,394.7 billion, saying, “It reflected quality costs related to voluntary recalls such as Kona electric vehicles.”
This is because the recall-related expenses of KRW 386.8 billion were additionally reflected.
If we add up to the 38.9 billion won in the recall cost, which was previously reflected in October last year, the cost that Hyundai will bear is about 425.5 billion won.
Meanwhile, LG Chem, a subsidiary just before the spin-off of LG Energy Solutions, also announced a correction that last year’s operating profit decreased from KRW 6736 billion to KRW 118.6 billion.
The difference is 550 billion.
Likewise, it is necessary to add up the recall-related expenses, which were previously published, and LG Energy Solutions has not disclosed a specific amount of contributions, but it is known that it has set about 100 billion won in advance.
In other words, the recall cost set by LG Energy Solutions is in the range of KRW 600 billion.
But why 3v7?
Then, based on the amount, the share ratio is close to 4 to 6, so why is it that they decided to pay 3 to 7? Recall-related expenses are reflected in the financial statements in advance, taking into account the money that will be incurred during the recall process.
And during the actual recall, if more money goes in, the cost is added, and if it goes in, the cost is reversed and the amount is corrected.
So, the amount in the financial statements at this time cannot be regarded as the final confirmed recall cost.
In addition, since Hyundai Motors is a company that sells the final product of automobiles to consumers, and LG Energy Solution is a company that supplies the batteries in it to producers, the cost of each recall may be slightly different.
What is the reason for the recall and what vehicle?
On the 24th of last month, Hyundai Motor Company and LG Energy Solutions decided to replace all the batteries installed in 82,000 Kona-Ionik electric vehicles and 82,000 electric buses sold around the world.
Vehicles subject to recall were equipped with high-voltage batteries produced by LG Energy Solutions’ Nanjing Plant from September 2017 to July 2019.
At the time of the recall decision, the Ministry of Land, Infrastructure and Transport explained that some of the batteries produced at the time were likely to catch fire due to internal short-circuit due to poor cell manufacturing, and it was decided to replace all the high-voltage battery systems from the 29th.
Regarding this, LG Energy Solutions refuted, “In the case of battery cell failure, as announced by the Ministry of Land, Infrastructure and Transport, it is difficult to see it as a direct cause as no fire occurred in the reproduction test. Improvements have already been applied due to the initial problem of mass production of Nanjing Hyundai Motor Company’s production lines.” I did.