South Korean battery maker LG Energy Solution Ltd. is adjusting its investment strategy for its third plant in Michigan, which it is building in partnership with General Motors Co. (GM). The decision comes in response to lackluster demand for electric cars and concerns over potential political changes in the United States.

 Background

LG and GM began construction of the facility in 2022, with an initial investment commitment of approximately $2.6 billion. The original plan was for operations to commence in the first half of next year. However, the landscape has shifted significantly since then.

 Waning Demand for Electric Vehicles

Battery manufacturers worldwide are grappling with lower sales due to a decline in consumer demand for electric vehicles. For Korean companies like LG, the situation is further complicated by the looming US presidential election. Many of these companies heavily invested in North America following President Joe Biden's clean energy bill, which encouraged local EV manufacturing and aimed to reduce reliance on Chinese players.

 Political Uncertainty

The upcoming US election adds an additional layer of uncertainty. Former President Donald Trump has expressed his intention to take action against the so-called Inflation Reduction Act and roll back Biden's pro-EV policies if he were to win¹. This political backdrop has prompted LG Energy Solution to reevaluate its investment plans.

 GM's EV Program

GM, which initially planned to have three plants with LG in the US to qualify for tax credits, is also adjusting its expectations. CEO Mary Barra recently stated that GM won't have the production capacity to build one million EVs by the end of next year, as previously targeted¹.

 Industry-Wide Concerns

LG's decision reflects broader industry concerns. Yoonho Choi, CEO of Samsung SDI Co., another battery supplier, has called the situation a "new crisis." Samsung SDI has committed to two plants with Stellantis NV and another with GM in Indiana. Meanwhile, South Korea's third major cell maker, SK On Co., has declared an emergency after significant losses in the first quarter. SK On supplies batteries to Ford Motor Co. and Hyundai Motor Co., and its parent company, SK Innovation Co., is exploring options to enhance SK On's competitiveness¹.

In summary, the slowdown in LG's EV cell plant construction underscores the challenges faced by battery manufacturers in a shifting market. As the industry navigates political uncertainties and changing consumer preferences, companies like LG and GM must adapt their strategies to remain competitive.