Hyundai Motor is embarking on the world’s most expensive electric vehicle recall to replace almost 82,000 batteries globally following a string of electrical fires.
The South Korean carmaker said the recall would cost about Won1tn ($900m), which analysts said would be the costliest ever. The impact would be reflected in earnings for the final quarter of 2020, Hyundai said.
“Our priority is to dispel potential risks against customer safety despite the low possibility of fires and high financial burden,” Hyundai said in a statement on Wednesday.
The recall applies to almost 76,000 vehicles of its best-selling electric model, the Kona, as well as some Ioniq models and electric buses built between November 2017 and March 2020, that use battery cells made by LG Chem’s factory in Nanjing, China.
Hyundai and LG Energy Solution, LG Chem’s wholly owned battery division, are in talks about how to divide the cost of the battery replacement.
$900m Amount that Hyundai Motor estimates the recall will cost
The recall is Hyundai’s second for the Kona after more than a dozen caught fire due to battery problems. The carmaker said in October that it would recall 77,000 Konas to upgrade their battery management software.
The new recall came after a Kona caught fire even after having its software upgraded.
Hyundai and LG decided to replace the batteries because the companies could not completely prevent fire risks by upgrading battery management software alone, the transport ministry said.
“It will be the most expensive recall in the EV industry so far because other EV makers have just upgraded their software for battery management systems, which is a relatively small cost,” said Lee Hang-koo, an adviser at Korea Automotive Technology Institute.
The ministry is looking into the cause of the Kona fires and has not yet completed its probe, but said on Wednesday that it had found defects in some battery cells produced at LG’s Nanjing factory.
LG, the world’s largest electric vehicle battery producer, said it would co-operate with the recall and investigation.
Shares in Hyundai were down 3.9 per cent on Wednesday afternoon while LG Chem was down 2.8 per cent.
Hyundai has been criticised over the adequacy of previous voluntary recalls. Concerns over the safety of its electric vehicles also mounted after an electric bus manufactured by the carmaker caught fire this month.
Hyundai, together with affiliate Kia, is the world’s fourth-largest electric vehicle maker, with a combined 7.2 per cent market share as of September last year, according to industry tracker SNE Research. The pair aims to sell 1m electric vehicles annually by 2025.
The decision to replace the batteries is likely to set a precedent in the fast-growing electric vehicle industry, where carmakers including GM, Ford and BMW have made a series of recalls, all of which cited fire risks.
General Motors said in November that it would recall nearly 69,000 Chevrolet Bolt electric vehicles worldwide following several reported fires. The recalled Bolts made between 2017 and 2019 used high-voltage batteries produced at LG Chem’s Ochang plant in South Korea.
“GM is suffering a similar problem so Hyundai’s decision will intensify wrangling between EV makers and battery producers over who should be held responsible,” said Chung Sung-yop, an analyst at Daiwa.