LG Energy Solution-Ford Contract Termination Delays Recovery of European Plant Utilization Rate [Click e-Stock]

Contract Worth Nearly 10 Trillion Won Over Five Years Canceled
"Sluggish EV Sales in U.S. and Europe May Continue Through First Half of Next Year"

LG Energy Solution Poland Wroclaw Plant

LG Energy Solution has terminated its electric vehicle supply contract in Europe with Ford Motor Company. By canceling the largest of several contracts aimed at overcoming low utilization rates at its European plant, a decline in revenue after 2027 has become inevitable.

On the 18th, Samsung Securities lowered its target price for LG Energy Solution by 15.5% to 550,000 won, while maintaining a 'Hold' investment rating. The previous day's closing price was 415,500 won.

To improve utilization at its European plant, LG Energy Solution secured six orders over the past 18 months. The contract with Ford, signed in October last year, was the largest among them. The total contract size was 75 gigawatt-hours (GWh), covering the period from January 2027 to December 2032, with an estimated value of approximately 9.6 trillion won. However, Ford recently announced the discontinuation of its F-150 Lightning pickup truck and the cancellation of its plans to launch electric trucks and vans, which appears to have led to the termination of the battery supply contract as well.

As a result, improvement in the utilization rate at LG Energy Solution's European plant in 2027 is now inevitably expected to be delayed beyond initial projections. While the 32GWh contract worth 4.1 trillion won to be supplied to Ford from next year remains in place, it will be difficult to immediately secure new orders to replace the 75GWh volume originally planned for Ford.

Due to the discontinuation of electric vehicles in the United States and weakening demand for electric vehicles in Europe, automakers are now equipping mid- to low-priced vehicles with mid- to low-priced batteries, while enhancing cost efficiency for high-performance vehicles by adopting large-diameter cylindrical (46 series) batteries. Although demand for high-nickel batteries remains steady for the 46 series cylindrical type, a contraction in market presence is unavoidable in the short term.

Cho Hyunryul, a researcher at Samsung Securities, commented, "Profit recovery leveraging the advantage of local production of energy storage system (ESS) batteries in the United States is a positive factor." He added, "However, at the same time, sluggish electric vehicle sales in both the U.S. and Europe may intensify through the first half of next year."