Ultium Cells slows construction of Michigan battery plant amid stalling EV demand

Industry

Published: 22 Jul. 2024, 17:05 Updated: 22 Jul. 2024, 17:58

Ultium Cells slows construction of Michigan battery plant amid stalling EV demand

Ultium Cells' third plant in Michigan. Ultium Cells is a 50:50 joint battery venture between LG Energy Solution and General Motors. [LG ENERGY SOLUTION]

Ultium Cells, a joint battery venture between LG Energy Solution and General Motors, is slowing the construction of its third plant in Michigan as part of efforts to trim investments amid cooling EV demand.

"The supply of equipment and materials has been postponed so far," LG Energy's spokesperson told the Korea JoongAng Daily, adding that "the construction has never been halted," denying earlier local media reports that it has stopped entirely.

Kim Dong-myung, left, CEO of LG Energy Solution and Mary Barra, CEO of General Motors, pose for a photo after making an investment plan for a third battery plant in Lansing, Michigan, in 2022. [LG ENERGY SOLUTION]

The plant in Lansing, Michigan, is Ultium Cells' third after one in Ohio that started operation in 2022 and one in Tennessee that was up and running in March of this year. A total of 8.4 trillion won ($6 billion) has been committed to the three plants by Ultium.

The slowdown came as General Motors said in June that it expects to produce 200,000 to 250,000 EVs this year, down from the initially announced range of 200,000 to 300,000.

LG Energy in April officially declared that it will "cut capital expenditure considering sluggish EV market conditions and client demand," during a conference call.

The Korean battery maker in June suspended the construction of its battery production line for energy storage systems in Arizona only seven months after breaking ground. The company intended to produce lithium iron phosphate pouch-type batteries, a product currently dominated by Chinese players, with an annual capacity of 16 gigawatt-hours.

LG Energy's second-quarter profit more than halved to 195.3 billion won, down 57.6 percent on year, impacted by sluggish EV battery sales, according to a preliminary earnings announcement.

It fell considerably short of the market consensus of 267.7 billion won compiled by FnGuide.

When excluding tax credits from the U.S. government's Inflation Reduction Act, the company logged an operating loss of 252.5 billion won.

LG Energy Solution's share in the world's overall battery market slipped to 25.6 percent this year through the end of May from 27.3 percent during the same period last year, according to market tracker SNE Research.

The company is expected to explain the background of the slowdown in the construction of its U.S. plants in its second-quarter earnings conference call scheduled for July 25.

BY SARAH CHEA [chea.sarah@joongang.co.kr]