November 13, 2023 12:31
Battery maker LG Energy Solution and U.S. automaker Ford have scrapped plans to build a joint battery plant in Turkey that they announced nine months ago.
The two companies were expected to invest a combined W3 trillion to build the plant, but they canceled the plan after Ford announced in recent weeks that it is postponing US$12 billion in planned investment in electric vehicles due to slowing demand (US$1=W1,317).
Their Turkish partner Koc Holdings announced last Saturday that a memorandum of understanding signed with LGES and Ford in February of this year has been annulled.
The three companies had hoped to build a 25 GWh automotive battery plant for EVs to be sold in Europe by 2026 and expand output to 45 GWh in the future. Although the MOU was non-binding, it is rare to see a deal of that scale get scrapped in just nine months.
LGES, whose cumulative orders have surpassed W500 trillion, has been expanding plants either already operating or being built in Indonesia, Poland and the U.S. as well as Korea. When it announced the joint project last February, it pledged to "take the lead" in the European EV market.
But the outlook has shifted. LG said in a statement, "We mutually agree that this is not the appropriate time to continue with the investment in a battery cell plant in Turkey considering the current pace of EV adoption."
SK On and Ford also recently said they could postpone plans for a second EV battery plant in Kentucky, which was expected to begin operations in 2026, while Volkswagen Group announced early this month that it will indefinitely postpone a fourth EV battery plant it had been eying in Eastern Europe.
The slowdown in Europe's EV market is the biggest cause of the delays. According to the International Energy Agency, the EV market in the EU grew 40 percent annually on average from 2017 to 2019, but growth slowed to 15 percent last year. Volkswagen also said EV orders in Europe fell from 300,000 cars in 2022 to 150,000 this year.
But EV battery makers are merely still cautiously optimistic. Although the Turkish plant has been canceled, LGES will still supply Ford with EV batteries from its existing factories
"Although supply volume could shrink due to slowed demand, profitability could increase if EV batteries are manufactured at a proprietary plant instead of a joint factory," an industry insider said.
SK On said early this month that its battery plant schedule will not be hugely affected by the pace adjustments of automakers. It said its plants in Tennessee and Kentucky will start operations in 2025 as scheduled, and no supply bottlenecks are expected.
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