[Market Focus] 'Ford Contract Cancellation Shock' Drags Down LG Energy Solution and Other Battery Stocks

Shares of domestic secondary battery-related companies are trading lower after LG Energy Solution terminated its electric vehicle supply contract with U.S. automaker Ford and a European partner.

As of 9:10 a.m. on December 18, LG Energy Solution was trading at 386,000 won, down 29,500 won (-7.10%) from the previous session. At the same time, LG Chem was trading at 336,000 won, down 28,000 won (-7.69%).

Amid growing concerns over a prolonged electric vehicle chasm (a temporary stagnation in demand), other secondary battery stocks were also weak, with Samsung SDI down 4.75%, Ecopro BM down 4.64%, SK Innovation down 3.44%, and Ecopro down 3.00%.

The previous day, LG Energy Solution announced in a regulatory filing that "the battery supply contract signed with Ford in October last year has been terminated following a notice of cancellation from the counterparty." The value of the terminated contract is approximately 9.603 trillion won, which accounts for 28.5% of the company's recent revenue.

In relation to this, an LG Energy Solution representative explained, "Due to recent changes in policy environment and electric vehicle demand outlook, Ford has suspended production of some EV models," adding, "This is the reason for the contract termination notice."

On this day, Cho Hyunryul, a researcher at Samsung Securities, said of LG Energy Solution, "A decline in revenue after 2027 has become inevitable," lowering the target price by 15.5% to 480,000 won while maintaining a 'neutral (HOLD)' investment rating.

He noted, "In order to overcome the low utilization rate at its European plant, LG Energy Solution has pursued six orders over the past 18 months, but the largest of these contracts has now been canceled. At this point, it will not be easy to immediately secure new orders to replace this volume. The improvement in the European plant's utilization rate in 2027 is likely to be delayed more than expected."