Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Battery firms see possible declines over shifting global EV policies
The words "Ford Cologne Electrification Center" are projected onto Ford Motor's headquarters in Dearborn, Mich., Feb. 17, 2021, following the company's announcement it would build electric vehicles in Cologne, Germany. Reuters-Yonhap
By Park Jae-hyuk
Reinforcing ESS business becomes inevitable
The Korean battery industry is feeling tangible impacts from the reversal of electric vehicle (EV) policies in the United States and the European Union’s withdrawal of its plan to ban the sale of internal combustion engine vehicles starting in 2035.
As global carmakers retreat from EVs in line with those shifts, concerns are growing over a potential decline in profits for Korean battery companies.
LG Energy Solution (LGES) said Wednesday that Ford Motor canceled a $6.5 billion contract signed last year for the supply of 34 gigawatt-hours (GWh) of batteries from 2026 to 2030 and another 75 GWh from 2027 to 2032.
Last week, Ford decided to dissolve a U.S. joint venture with another Korean battery maker, SK On, which has served as one of the main suppliers for its EVs.
The decisions came after U.S. President Donald Trump cut subsidies for EV purchases. The U.S. carmaker has already halted production of the F-150 Lightning electric pickup and development of next-generation all-electric pickups and commercial vans.
“This issue stems from our partner’s decision to discontinue certain EV models due to recent policy changes and shifts in demand forecasts,” LGES said in a regulatory filing.
Although the company vowed to maintain its long-term partnership with the U.S. carmaker, market analysts warned of potential deterioration in LGES’ earnings after 2027.
“At this point, it will be difficult for the company to immediately secure new orders for a similar battery volume,” Samsung Securities analyst Cho Hyun-ryul said. “A delay in improving the capacity utilization rate at its European plant has become unavoidable.”
Earlier this week, the European Commission also unveiled a proposed revision to its plan to ban the sale of internal combustion engine vehicles by 2035 as part of its goal to reduce carbon emissions from new cars. Considering the rapid growth of Chinese EVs in the European market, the commission decided to pursue a 90 percent reduction instead of the original 100 percent target.
The proposal is expected to negatively affect the profitability of Korean battery companies, which have sought to expand their presence in Europe to offset slowing EV demand in North America.
Amid the bleak outlook, shares of battery and materials manufacturers plummeted during Thursday’s trading session.
To address growing concerns, Korean battery companies are shifting their focus to batteries for energy storage systems (ESS), which are seeing rising demand driven by the construction of data centers.
LGES is expected to accelerate the conversion of production lines at its Polish plant to manufacture ESS batteries. The factory had originally been intended to produce EV batteries for Ford. In the U.S., the company has already converted production lines in Michigan to meet local ESS demand.
Samsung SDI also plans to convert its U.S. production lines to supply lithium iron phosphate batteries worth more than 2 trillion won ($1.35 billion) to a local energy infrastructure company for long-term ESS projects.
SK On is preparing to supply ESS batteries from its Tennessee plant, which it will soon fully own following the dissolution of its joint venture with Ford.