LG Energy Solution announced plans to commence full-scale production of lithium iron phosphate (LFP) batteries for energy storage systems (ESS) at its Michigan facility in the United States during the latter half of 2025. The expansion is supported by a debt guarantee of 2 trillion won ($1.4 billion), which will finance investments in the existing plant.
Originally established as a manufacturing base for electric vehicle (EV) batteries in North America, the Michigan plant will now include a dedicated ESS production line on a previously reserved expansion site. This development represents LG Energy Solution’s inaugural ESS production facility within the United States.
While the company has not specified its annual production capacity, industry insiders estimate it to be approximately 17 gigawatt-hours. This capacity is sufficient to supply electricity to an estimated 12.7 million US households. The LFP batteries intended for ESS applications will utilize a pouch cell design, known for higher energy density and a more stable state of charge system, despite typically being considered less safe than prismatic cell designs. Additionally, LG Energy Solution will offer a cloud-based software solution that enables real-time monitoring and performance analysis of ESS operations.
This strategic expansion aims to leverage the forthcoming increase in US tariffs on Chinese-manufactured ESS, set to take effect in 2026. An executive order from the Trump administration imposed an initial 10 percent tariff on all Chinese goods, with tariffs on Chinese battery-powered energy systems projected to rise to approximately 38.4 percent.
According to SNE Research, Chinese companies dominated 86 percent of the global ESS market in 2023, led by firms such as CATL, BYD, and EVE. These Chinese manufacturers have significantly reduced ESS prices in the US, the world’s second-largest ESS market, to below $100 per kilowatt-hour, thereby increasing the price disparity with Korean competitors.
Despite a planned reduction in production facility investments by 20-30 percent this year due to a global decline in EV demand, LG Energy Solution is moving forward with substantial ESS investments. An official from LG Energy Solution stated, “This 2 trillion won debt guarantee will not increase our financial burden, as it was already outlined in our investment plan for this year. We will carry out targeted investments to enhance operational efficiency.”
In addition to the ESS production expansion, LG Energy Solution announced a 3.6 trillion won debt guarantee to acquire the third Ultium Cells battery plant, a joint venture with General Motors, also located in Michigan. This acquisition is expected to reinforce LG’s position in the North American EV market amidst the current slowdown in the EV industry. An industry source noted that acquiring the Ultium Cells plant could be a cost-effective strategy for LG Energy Solution, given the high costs associated with building new battery manufacturing facilities in the US and the anticipated long-term growth in demand for fully electric vehicles.
Source: The Korea Herald
