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Leading battery makers are scaling back their North American investments and laying off workers as the US electric vehicle industry wrestles with sluggish demand.
LG Energy Solution, one of the world’s top three EV battery producers that has joint ventures with General Motors, Honda and Hyundai in the US, announced this month it was laying off 170 workers at its plant in Michigan.
Fellow South Korean battery maker SK On, which signed an $11bn deal with Ford in 2021 to help electrify the US carmaker’s fleet, said it was also putting workers on furlough as it reduces output at its plant in Georgia.
SK laid off more than 100 workers at the same plant in September and is delaying the launch of a second plant in Kentucky, a joint venture with Ford, which was scheduled to begin operation in 2026.
“The market seems to be going through a correction,” said Lee Hang-koo, president of Jeonbuk Institute of Automotive Convergence Technology (JIAT). “There is growing concern about overcapacity, as too much investment has been made in the sector in a short period of time.”
Aided by tax credits under President Joe Biden’s flagship climate legislation, the South Korean battery companies have made themselves integral to EV manufacturing in the US, setting up joint ventures with North American carmakers to produce batteries.
But in recent months Ford, GM and Tesla have all paused their plans to expand their EV manufacturing capacity, as consumer demand has proven weaker than expected.
In a statement, LGES said it was laying off almost 10 per cent of the workforce at its wholly owned site in Holland, Michigan. It said this was partly due to “automakers realigning the speed of the EV transition”.
“LG Energy Solution continues to grow and has a bright future in the automotive industry,” the company said, adding that it planned to hire about 1,000 more workers once its plant expansion in Michigan is completed in the third quarter of next year.
Tim Bush, a Seoul-based battery analyst for UBS, said legacy carmakers Ford and GM bear the greatest responsibility for the slump in demand. UBS analysts last month slashed their projection for growth in the US EV market next year from 45 per cent to 10 per cent.
“They’re not selling affordable EVs,” said Bush, noting that the $7,500 tax incentive contained in Biden’s Inflation Reduction Act was designed to help make entry-level EV models more accessible.
“They’re selling SUVs and pick-up trucks and cars that cost around $80,000, but they have very little in the way of an entry-level or mass-market vehicle.”
As a result, Bush said battery makers who aligned with South Korean and Japanese car manufacturers with large stables of hybrid and EV cars and Tesla were better placed to weather the slowdown.
“LG is relatively better positioned because they’re reprioritising investment towards Hyundai and Tesla, which are making vehicles that actually people want to buy and doing so profitably,” said Bush. “SK on the other hand is more exposed to Ford, which doesn’t yet have a competitive offering.”
Japan’s Panasonic has cut back its automotive battery production at home, where it produces batteries for the more expensive Tesla models including the Model S and Model X. But it is continuing to invest in its Nevada plant in the US, where it produces batteries for cheaper Teslas that benefit from the IRA.
The Japanese company is considering the possibility of a third US factory in addition to a second site it is building in Kansas.
“They [Panasonic] don’t have to cut back. They have to scale up. They have to plan for a third factory now,” said Atul Goyal, an analyst at Jefferies.
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