Hyundai Motor Group is strengthening its electric vehicle (EV) battery supply chain and internal production capacity, as the world’s third-largest auto group seeks to present price-competitive EV models with better driving ranges.

Last week, SQM, a Chilean lithium mining company, announced that it reached a long-term agreement with Hyundai Motor and Kia to supply lithium hydroxide to the South Korean automakers.

The SQM deal marked Hyundai’s third lithium hydroxide supply contract signed this year after the ones with Chinese companies Ganfeng Lithium and Chengxin Lithium Group announced in January, reports Yonhap news agency.

Lithium hydroxide is used in high-priced ternary batteries, such as NCM (nickel-cobalt-manganese) batteries, which are high in energy density. NCM batteries are relatively expensive but allow for a long driving range per charge for EVs compared with the more broadly used LFP (lithium iron phosphate) batteries.

Auto industry observers see Hyundai Motor Group’s recent lithium hydroxide supply deals as a sign that the group is focusing on adopting high-capacity NCM batteries to boost the driving range of its future EV models.

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Anxiety over the driving range of EVs is often cited as a key hindrance in the mass adoption of electric cars, with many drivers remaining unconvinced that EVs offer enough mileage per charge.

The Casper Electric, Hyundai’s yet-unveiled sub-compact electric sport utility vehicle (SUV), boasts a maximum driving range of 315 kilometers on a single charge thanks to its NCM battery, whereas the comparable Ray EV by Kia has a range of 205 km due to its LFP battery.

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The Casper Electric, which will be badged as Inster in Europe, will debut at the Busan International Mobility Show this week.

The EV3, Kia’s new dedicated EV SUV to be sold starting in July, will also be equipped with an NCM battery instead of an LFP battery. The long-range trim of the EV3, fitted with a high-capacity 81.4 kWh NCM battery, has a driving range of up to 501 km on a single charge.

Given its higher price tag, Hyundai Motor Group is seeking to lower its EV customers’ NCM battery cost burden by internalizing production.

This year, the South Korean auto giant began production at its battery plant in Indonesia established jointly with LG Energy Solution. Kia will use the NCM batteries produced at the Indonesia plant in the upcoming EV3 units.

Song Ho-sung, CEO and president of Kia, last month stressed the importance of ensuring the long driving range of EVs, suggesting that Kia will expand its adoption of NCM batteries.