Saudi Arabia’s SNB Capital picks up stake in South Korean battery maker for $100m

The electric car production line at the Ford's factory in Cologne, Germany. Getty

Saudi Arabia’s SNB Capital has acquired a stake in South Korean battery manufacturer SK On for $100 million amid a boost in the adoption of electric vehicles globally.

SK On, one of the world’s largest EV battery manufacturers, plans to use the proceeds to fund its expansion and increase its production capacity, the Saudi National Bank subsidiary said on Tuesday.

Part of the funds will also be allocated towards research and development, the company said.

“This investment highlights SNB Capital's unwavering commitment to enriching its clients' portfolios with niche, quality and geographically diverse investment options, to take part in the sustainable transportation and green energy sector,” said Khaled Al Braikan, head of asset management at SNB Capital.

“We remain active in our pursuit of unlocking new investment avenues for growth that meet our client’s requirements.”

SK On supplies batteries to car makers such as Ford, Hyundai, Volkswagen and Mercedes-Benz through its factories in Asia, Europe and North America.

Global electric car sales are set to surge by 35 per cent this year, supported by government subsidies and the tightening of carbon dioxide emission standards, the International Energy Agency said in an April report.

Electric car sales are projected to rise to 14 million in 2023, from 10 million last year, according to the agency.

It is expected that EVs will account for half of global car sales by 2035 and hit about 73 million units by 2040, from two million in 2020, a study by Goldman Sachs showed in February.

However, the industry is currently struggling with high raw material prices, including for critical minerals such as nickel and cobalt, as well as supply chain disruptions following Russia’s invasion of Ukraine last year.

Saudi Arabia has been increasing its focus on the EV industry, with sovereign wealth fund, the Public Investment Fund, investing heavily in electric car maker Lucid.

In June, Lucid Group said it planned to raise about $3 billion through a stock offering, with the majority of that coming from the PIF.

The PIF, which owns about 60.5 per cent of Lucid, agreed to purchase more than 265 million shares of the car maker's common stock in a private placement for about $1.8 billion, Lucid said at the time.

The fund first bought into Lucid in 2018, investing $1 billion in the Tesla rival. In February 2021, the PIF, US investment firm BlackRock and others poured an additional $2.5 billion into Lucid.

Last year, Lucid chairman Andrew Liveris said the company planned to build a factory in Saudi Arabia by 2025 or 2026.

SNB Capital is the largest asset manager in the kingdom, with 230.4 billion Saudi riyals ($61.42 billion) of assets under management as of December 2022.

Last year, Moody's Investors Service assigned “A3" long-term issuer ratings to SNB Capital, with a stable outlook, citing a “high level of support” from Saudi National Bank, in its first rating of the company.

The agency also issued a “P-2" rating to SNB Capital's commercial paper under the Global Scale Rating, with an overall stable outlook.