LG Energy Solution has ended its 3.9 trillion won ($2.7 billion) electric vehicle battery deal with the Michigan-based Freudenberg Battery Power System amid a pullback in US electrification initiatives and weakening EV demand.
The company said in a regulatory filing Friday that the cancellation of the EV battery module supply agreement follows FBPS’s decision to withdraw from its battery business. The termination value excludes the supply volume already made under the original 4.04 trillion won contract.
FBPS, a subsidiary of Germany’s Freudenberg Group, operates a gigafactory in Midland, Michigan, dedicated to battery pack assembly, located near LG Energy Solution’s battery cell plants in Holland and Lansing. FBPS had planned to source battery modules from LG Energy Solution, assemble them into packs and supply them to major North American manufacturers for commercial vehicle applications.
With the termination of a 9.6 trillion won EV battery cell contract with Ford Motor Co. on Dec. 17, LG Energy Solution has canceled deals totaling 13.5 trillion won — more than half of its 25.62 trillion won in sales last year.
US automakers and battery companies have scaled back their EV businesses following a downturn in the market, mainly driven by Washington’s reversal of clean energy policies, including the removal of a $7,500 consumer subsidy.
According to a CNBC report on Tuesday, US EV sales posted a record high in September, accounting for 10.3 percent of new vehicle sales ahead of the expiration of federal tax credits. However, that demand fell sharply to a preliminary estimate of 5.2 percent in the fourth quarter.
LG Energy Solution stated, “As there were no facility investments or customized R&D expenses made for the contract (with FBPS), the cancellation will not result in investment losses or additional costs. We will take this opportunity to streamline customers with uncertain business prospects and secure more solid sources of demand.”
hyejin2@heraldcorp.com
