SEOUL -- South Korean energy company SK Innovation said Wednesday that it will spin off its mainstay battery business in October to better focus on the fast-growing electric vehicle market.
SK Innovation's board approved the plan on Tuesday, stressing that batteries have growth potential and that the business is globally competitive. The new entity, provisionally named SK Battery, will be launched on Oct. 1 after a general shareholders' meeting on Sep. 16 signs off on the plan.
"We made this decision to establish a management system specialized for each business, strengthening its original competitiveness," said SK Innovation board chairman Kim Jong-hoon in a statement. "We will make each entity more flexible to cope with management environments more quickly by attracting investment and improving corporate value."
SK Innovation also said it will spin off its oil exploration and production business and assume the role of a holding company.
Investors, however, appeared unsatisfied, sending SK Innovation shares down as much as 7.9% on the benchmark Kospi index in Wednesday trading on worries that the spinoff could undermine the company's overall long-term value as batteries are its core business.
But the stock ultimately pared losses to close down 3.75% to 243,500 won ($213).
The announcement comes with the administration of U.S. President Joe Biden keen to secure a stable battery supply chain for American automakers as the industry is fast switching to electric vehicles.
In May, Ford and SK Innovation signed a deal to create a joint venture to produce traction battery cells and array modules starting mid-decade, with potential to expand. Next-gen cells and arrays will be used to power several future Ford electric vehicles.
SK Innovation has 40 gigawatt hours of battery production capacity per year, with manufacturing lines in the U.S., China and Hungary as well as South Korea. The company plans to expand capacity to 85 GWh in 2023, 200 GWh in 2025 and eventually 500 GWh in 2030.
One gigawatt hour equals 1 billion watt hours of energy.
SK Innovation is the world's sixth-largest EV battery maker. It finished the first half of this year with a 5.2% share of the market, according to SNE Research. China's CATL led with a 29.9% share, followed by South Korea's LG Energy Solution at 24.5%. Japan's Panasonic was No. 3 at 15%.