Hyundai to Spend $900 Million to Replace Battery Systems in 82,000 EVs Due to Fire Risk

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【Summary】South Korean automaker Hyundai Motor Co. is recalling around 82,000 electric vehicles to replace battery packs that pose a fire risk. The recall is one of the first major recalls of electric vehicle battery packs by a major automaker. Hyundai said that recalling the battery packs will cost roughly $900 million.

FutureCar Staff    Apr 02, 2021 12:30 PM PT
Hyundai to Spend $900 Million to Replace Battery Systems in 82,000 EVs Due to Fire Risk

South Korean automaker Hyundai is recalling around 82,000 electric vehicles to replace battery packs that pose a fire risk, Reuters reports. The recall is one of the first major recalls of a battery pack by a major automaker.

The recall affects nearly 76,000 Kona EVs built between 2018 and 2020, including about 25,000 sold in South Korea. The Kona EV is Hyundai's best selling electric vehicle. 

There have been 15 reported cases of fires involving the Kona EV, including 11 in South Korea, two in Canada and one each in Finland and Austria, Reuters reports.

The automaker is advising Kona and Ioniq owners to limit battery charging to 90% of capacity until the battery has been replaced, Hyundai said.

Hyundai initially recalled the vehicles last year after reports of battery fires. The initial recall was to upgrade software designed to prevent overheating of the battery pack. 

Hyundai said the battery pack recall will cost roughly $900 million, which includes the money spent on the initial recall last year.

The investigation started after one of the electric Kona SUVs that received the software update caught fire in January, which prompted South Korean authorities to launch an investigation to determine if the software update was adequate enough to prevent future fires or the entire battery pack would need to be replaced. 

The problem poses a serious safety risk to vehicle occupants. Hyundai did not comment on the cause of the fires.

The massive recall will also test Hyundai's ability to address any future problems with fully-electric vehicles, and the rest of the world's EV manufacturers are likely paying close attention to how the automaker deals with the recall and expected fallout.

"It's very significant for both Hyundai and LG as we are in the early stages of the electric vehicle era. How Hyundai handles this will set a precedent not just in South Korea but also for other countries," Lee Hang-koo told Reuters, who is a senior researcher at the Korea Institute for Industrial Economics & Trade.

The batteries in question were produced by battery maker LG Chem, one of the leading suppliers of batteries to the auto industry. LG Energy Solutions, a division of LG Chem Ltd that manufactures the batteries the company is standing by its technology and placing the blame on Hyundai for the fire risks.

The battery maker said in a statement that Hyundai "misapplied LG's suggestions for fast-charging logic in the battery management system", adding the battery cell should not be seen as the direct cause of the fire risks.

EV batteries tend to heat up while charging, which is considered normal for lithium-ion batteries used in a variety of devices. So electric vehicle makers use software that manages the charging process to prevent individual cells from becoming too hot while charging.

However, South Korea's transport ministry said in a statement that some defects had been found in battery cells produced at LG Energy's China factory. 

According to Reuters, analysts said they had been told by Hyundai that an agreement on how to split the costs may be worked out next week. But it's likely that each company will be reluctant to take the blame for the recent battery fires.

Electric vehicles are equipped with complex software-based battery thermal management systems that are designed to prevent the batteries from overheating, especially while under load and during charging.

In 2019, segment leader Tesla had to address this issue after a Model S sedan caught fire in China. The car was turned off and parked in a garage when the fire broke out. Tesla said a battery module caused a Model S sedan to catch fire in Shanghai.

To correct the issue, Tesla revised its vehicle settings to further protect its batteries following an investigation into the incident. The investigators conducted a thorough analysis of the battery, software, manufacturing data and vehicle history.

However in Tesla's case the investigators found no system defect. The initial findings showed the incident was caused by a single battery module located at the front of the vehicle, according to Tesla. The battery module was not supplied by Tesla's battery supplier Panasonic.

To address the issue, Tesla revised the charge and thermal management settings on Model S and Model X vehicles via an over-the-air (OTA) software update, to help further protect the battery and improve battery longevity, the company said.

Also in 2019, German automaker Audi recalled the new e-tron SUV over battery fire risks.

An electric vehicle's battery pack is the most expensive component in the vehicle, which is one of the reasons that the recall will cost Hyundai close to a billion dollars.

A typical EV battery pack cost roughly $126 for each kWh of power, according to BloombergNEF which tracks costs. The Kona EV comes with a 64.0 kWh battery pack, which translates to $8,064, accounting for about 20% of the Kona EV's MSRP.

Hyundai shares fell by 3.9% on Wednesday after the announcement. Shares of battery maker LG Chem fell around 3%.

The recall announcement comes days after Hyundai unveiled its IONIQ 5 fully-electric SUV under its new electric-only sub-brand IONIQ, which is built on the automaker's all-new EV platform.

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