Korean battery manufacturers are facing growing challenges as U.S. clients withdraw from previously committed contracts amid weakened demand for electric vehicles. This month alone, LG Energy Solution saw approximately 13.6 trillion won in deals canceled, surpassing half of its 2024 revenue of 25.62 trillion won. A major portion of this loss stems from the termination of a 3.92 trillion won agreement with Freudenberg e-Power System, of which only about $110 million worth of battery deliveries had been completed. In effect, nearly 96 percent of the original contract was voided after Freudenberg decided to exit the battery business due to sluggish market conditions.
Earlier in December, LG Energy Solution also disclosed the cancellation of a $6.5 billion supply deal with a leading U.S. automaker. Industry observers point to the rollback of a $7,500 EV tax credit last year as a key factor in dampening North American electric vehicle uptake. In response, automakers have shifted focus toward higher-margin hybrid and internal combustion models, with one major manufacturer suspending production of its electric pickup to prioritize more profitable lines.
To increase liquidity, LG Energy Solution sold buildings, equipment, and other assets from its US joint venture with Honda to Honda’s US subsidiary for approximately 4.2 trillion won. Separately, a planned joint venture between Ford and SK On was restructured: SK On will take full ownership of a Tennessee battery plant, while Ford will independently operate two plants in Kentucky using licensed low-cost battery technology from a Chinese supplier.
Looking ahead, Korean firms are attempting to pivot toward the European energy storage system (ESS) market, but face intense competition from low-cost Chinese producers. Chinese batteries, particularly in the lithium iron phosphate segment, are priced at less than half the cost of Korean offerings, and Chinese manufacturers hold significant technological advantages in this chemistry.
“ESS demand tends to be transactional, making it hard to establish stable production plans,” said analyst Lee Choong-jae of Korea Investment Securities. Frequent raw material price fluctuations further hinder advance inventory building. Between January and October, Korea’s three major battery makers’ share of the European EV battery market fell to 35 percent, down 10 percentage points from late 2024, while Chinese brands captured 64 percent of the market, according to SNE Research.
Source: Korea JoongAng Daily
