The notion that automakers will shift from gasoline engines to electric powertrains over the next decade or two signals a seismic disruption of industry technologies. But the sudden arrival of barely heard of companies such as SK Innovation turns upside down the age-old industry order, in which automakers' names represented their powertrains, not just their vehicles. Ford Motor Co. has always built the engines for Fords and Lincolns. Toyota Motor Corp. makes engines for Toyota and Lexus vehicles.
But in the next chapter of the industry, companies such as SK Innovation, LG Chem, Samsung and Panasonic will essentially serve as the world's engine plants.
It is a daring plunge for SK. In 2017, when the CEO surveyed the financial resources at his disposal, he was contemplating the deep pockets of its parent organization, SK Group, one of South Korea's largest business groups. With major operations in oil refining, petrochemicals, shipping, cellphone and Internet services, semiconductors and construction, SK posted 2018 sales of about $143 billion and operating profit of $24.5 billion.
"We are able to have a sufficient cash flow to support our efforts," Kim said.
But it wasn't merely a question of whether an oil and telecommunications conglomerate could afford the tab — it also represented an existential question for SK.
"As an oil refining company, the shift from combustion engines to electric power could be a risk for us," said Kim, 58, who earned an MBA while working at SK Group in positions in oil, chemicals, strategy and communications. "It might be a threat. So we felt the need to respond quickly."
Why quickly? Some world markets — especially the U.S. — talk about EVs and other electrification, but sales continue to fall short of enthusiastic forecasts.