(Bloomberg) -- SK Innovation Co. will split off its battery business as the company looks to build up production to meet growing global demand for electric cars.

SK Innovation plans to form SK Battery in October after seeking approval from its shareholders on Sept. 16, the company said in a regulatory filing Wednesday. It will also separate its oil exploration and production operations into a new entity, it said, adding that SK Innovation will wholly own the two new companies after the split.

Demand for batteries has surged this year as governments provide incentives for consumers to buy electric cars as part of efforts to reduce carbon emissions. Global EV battery sales more than doubled in the first half, led by manufacturers in China, according to SNE Research.

“The decision to split the businesses is to set up a management system that will help to strengthen their competitiveness,” SK Innovation said in the statement. “They will be able to better respond to the business environment to make timely investment decisions.”

Shares of SK Innovation fell as much as 7.9% in early Seoul trading, the biggest intraday decline since July 1 when the company first announced it was considering splitting the battery business into a new entity. Investors would have preferred a spin-off which would have given them exposure to the fast-growing battery business.

Separately, SK Innovation said the battery unit’s second-quarter operating loss narrowed to 97.9 billion won ($85 million) from 113.8 billion won a year earlier after it was able to start production at its new plant in China earlier than scheduled. Sales jumped 86% to 630.2 billion won.

Last month, SK Innovation lifted its target for battery capacity to 200 gigawatt-hours by 2025 to meet soaring demand, from its current rate of about 40 GWh. The company will aim to produce 500 GWh by the end of the decade. The announcement was part its plan to invest 30 trillion won through 2025 to reach net- zero in all of its operations before 2050.

SK Innovation’s Chief Executive Officer Kim Jun said in July that if SK seeks an initial public offering of the battery business, all options will be considered, including a listing on New York’s Nasdaq exchange.

SK Innovation’s battery business is aiming to post its first annual operating profit next year and plans to expand its energy storage systems and batteries for flying cars and robots.

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