LG Energy Solution and GM Temporarily Halt Construction of 3rd Battery Plant in the US

In the Global High Interest Rate and High Inflation Environment,
Electric Vehicle Demand Stagnation Seems to Prompt Speed Adjustment

The construction of the third electric vehicle battery plant by Ultium Cells, a joint venture between LG Energy Solution and global automaker General Motors (GM), in the United States has been temporarily halted. This move is seen as a speed adjustment amid the global high interest rates, high inflation environment, and the electric vehicle chasm (Chasm: temporary demand stagnation).

According to industry sources on the 21st, Ultium Cells recently paused the construction of its third plant in Lansing, Michigan, which was scheduled to start operations next year. However, this is not a complete shutdown or withdrawal, and construction is expected to resume after closely monitoring market conditions.

The Ultium Cells third plant is an electric vehicle battery production base with a total investment of $2.6 billion (approximately 3.6 trillion KRW). Originally, construction began in 2022 and was planned to be completed in the second half of this year. The first phase of mass production was scheduled to start early next year, with an annual production capacity planned to expand to 50 GWh (gigawatt-hours).

However, due to the electric vehicle chasm, major electric vehicle manufacturers are revising their strategies. GM announced that it would reduce its electric vehicle production this year by 50,000 units compared to before, targeting 200,000 to 250,000 units. Ford decided to increase investment in internal combustion engine vehicles instead of electric vehicles. Tesla also delayed its plan to build a new factory in Mexico.

Accordingly, electric vehicle battery companies are adjusting their pace as well. The temporary halt in the construction of Ultium Cells’ third plant is part of this trend. LG Energy Solution also recently paused construction of a dedicated lithium iron phosphate (LFP) battery plant for energy storage systems (ESS) in Arizona, USA, just two months after groundbreaking.

Meanwhile, LG Energy Solution is expected to disclose its future investment direction, including the temporary halt of Ultium Cells’ third plant, during its Q2 earnings announcement on the 25th. Currently, Ultium Cells operates its first plant in Ohio and its second plant in Tennessee, USA.