Korean battery firms take hit as more EV projects in US fall through

Then-Nissan Motor Chief Operating Officer Ashwani Gupta announces the Japanese carmaker's plan to invest $500 million to transform its Canton Vehicle Assembly Plant to build electric vehicle models starting in 2025 during an event in Canton, Miss., Feb. 18, 2022. Courtesy of Nissan Motor

Repeated cancellations of electric vehicle (EV) production projects in the United States are weighing on Korean companies that had planned to supply batteries, prompting them to tighten partnerships with European automakers.

SK On is reconsidering its plan to supply $10 billion worth of batteries to Nissan Motor’s Canton plant in Mississippi after the Japanese carmaker decided not to produce EVs at the U.S. facility.

The move follows SK On’s decision last December to dissolve its joint venture with Ford Motor amid slow progress in the U.S. carmaker’s electrification efforts, raising concerns about the Korean battery maker’s business there.

In March last year, SK On agreed to supply 99.4 gigawatt hours of high-nickel batteries to Nissan, marking the first time a Japanese automaker would use the Korean company’s products.

However, after delays in its electrification strategy, Nissan informed dealers and parts suppliers in the U.S. on April 30 that it would cancel a $500 million project to produce electric SUVs in Canton.

"Canton does have a future that will include diverse powertrains, but it will not include EVs," said Ashli Bobo, spokesperson of Nissan's U.S. operations.

The Ohio plant of Ultium Cells, the joint venture between LG Energy Solution (LGES) and General Motors / Courtesy of LGES

LG Energy Solution (LGES), which terminated its Canadian joint venture agreement with Stellantis in February, has incurred losses due to the suspension of its joint venture plant with General Motors (GM).

"Ultium Cells, the joint venture between LGES and GM, will shut down factories throughout the first half of this year, so its EV battery sales volume in the U.S. market will likely be nearly zero during the period," iM Securities analyst Jeong Won-seok said, as LGES reported a first-quarter operating loss of 207.8 billion won.

Samsung SDI is facing growing uncertainty over its partnership with Stellantis. In February, Bloomberg reported that Stellantis was considering exiting its joint venture with Samsung SDI after scaling back EV production.

With the operation of Samsung SDI’s joint venture with GM also delayed, CEO Choi Joo-sun of the Korean firm told shareholders in March that the company has continued discussions with both Stellantis and GM.

"Due to the slow demand for EVs in the U.S., the joint venture with Stellantis swiftly transformed some of its production lines to produce batteries for energy storage systems," he said.

Amid weakening U.S. demand for EVs following the Donald Trump administration’s elimination of EV tax credits, Korean battery makers are shifting their focus to Europe.

LGES has reportedly signed a 10 trillion won ($6.8 billion) contract with BMW to supply cylindrical batteries. The company is also set to supply $1.4 billion worth of lithium iron phosphate batteries to Mercedes-Benz.

Samsung SDI signed a multiyear contract worth 10 trillion won with Mercedes-Benz last year, becoming a supplier of EV batteries to three leading German automakers, including BMW and Audi.

SK On has recently raised the utilization rate at its Hungarian plant, supported by strong growth in sales of European EVs using its batteries. Last September, the company also appointed Thomas Eller, a former Continental executive, as the first head of its European operations.