LG Energy Solution has withdrawn its plans to build a joint venture battery plant in Turkiye with U.S.-based Ford and Turkiye-based Koc Group. Instead, the company will produce battery cells at an existing idle facility and supply them to Ford.
LG Energy Solution announced on Nov. 11 that it is withdrawing from a non-binding tripartite memorandum of understanding (MOU) to build a local joint venture plant with Ford and the Koc Group. “Considering the current pace of the world’s transformation into electric vehicles, the three companies have agreed that it is not the right time to continue investing in building a battery cell production facility in Turkiye,” the Korean battery maker said.
In February, the three companies signed a memorandum of understanding to build a 25 GWh/year electric vehicle battery plant in the Ankara region of Turkiye with an eye towards starting production in 2026. They said they would consider ramping up production to 45 GWh in the future. They planned to break ground for the plant by the end of this year but a slowdown in EV sales growth, especially in Europe, has prompted a sharp turnaround in their strategy. They judged that it was not the right time to invest massively in expanding production facilities.
Many experts expected the withdrawal of the joint venture project between LG Energy Solution and Ford in Turkiye. Ford, which had planned to invest US$50 billion in electric vehicles over five years through 2026, announced in October that it would put off its US$12 billion investment plan as market growth slowed downed this year. This came on top of the announcement that the U.S.-based automaker expects to lose US$4.5 billion in its EV business this year alone.
Ford’s decision to delay the start of a second plant in the state of Kentucky in the United States with SK Innovation followed the Nov. 11 announcement that it had scratched off plans to build a joint venture with LG Energy Solution in Turkiye.
The slowdown in EV demand is clear, particularly in Europe. According to global automotive market researcher MarkLines, European sales of battery electric vehicles (BEVs) grew just 13 percent year on year in September. In Germany, where subsidized EV purchases ended, EV sales fell 29 percent. The slowdown is quite notable compared to two- to four-fold surges in sales in 2021 alone. “EV orders in Europe in the third quarter of this year totaled 150,000 units, 50 percent lower than in the same period a year earlier,” Volkswagen said. The German carmaker announced a plan to cut EV production and cancel the construction of a new EV factory.
Even in the United States where EV sales have been relatively strong, a concern is growing over a market slowdown as high interest rates reduce consumers’ purchasing power and auto loan delinquency rates soar. According to credit rating agency Fitch, the delinquency rate of U.S. auto loans rose to 6.1 percent in September, the highest in 30 years.
The slowdown in demand for EVs deals a direct blow to the EV battery industry. “European demand for Korean battery cell and battery materials is likely to slow down in the near future as inventories of EVs at major European automakers will swell,” said Jung Won-seok, a researcher at Hi Investment & Securities in Seoul.
LG Energy Solution also gave up its joint venture project in Turkiye after deciding to lower the utilization rate of its Polish plant in line with Volkswagen’s EV production cuts. The company arrived at the conclusion that there was no point in building a new plant when demand for EVs was slowing down and idle facilities were on the rise. Unlike North America, where production can be subsidized under the Inflation Reduction Act (IRA), there is little incentive to build a plant in Turkiye.
Experts expect a change in global EV investment practices where carmaker-battery maker joint ventures have been the norm. LG Energy Solution previously inked a long-term supply deal with Toyota instead of building a joint venture with the Japanese automaker.