South Korea’s LG Energy Solution (LGES) canceled A battery joint venture that it was pursuing in collaboration with Ford of the United States and Koç of Türkiye as the demand for electric vehicles slows down amid high interest rates.

In an announcement made on Sunday, LGES revealed that its joint partner, Koç, withdrew the memorandum of understanding (MOU) for establishing a joint venture in Turkey last Saturday.

“LGES, Ford, and Koç, the three parties that signed the MOU earlier this year, have mutually agreed to terminate the agreement,” LGES said, adding that given the current pace that consumer are adopting the use of electric vehicles, the three parties have concluded that it is not an appropriate time to continue the investment in the planned battery cell production facility in Turkey.

LGES and Ford had jointly announced plans to construct a battery joint venture factory in Turkey with Koç Group in February 2023, which was due to be completed by 2026. The initial plan was to build a factory with an annual production capacity of 25 GWh, with provisions to expand it to 45 GWh to meet growing demand. A production capacity of 45 GWh can power about 400,000 to 500,000 EVs.

Ford and Koç originally planned a joint venture with SK on Co. in March 2022, but the collaboration fell through.

“While the joint venture factory was canceled, our collaboration with Ford will continue. We plan to supply Ford with the same battery cells from our existing production facilities,” an LGES spokesperson said. LGES aims to supply Ford with batteries for commercial EVs, such as trucks, and is expected to fulfill most of the initially contracted quantities.

In the battery industry, there has been a trend of delaying factory operation plans in response to the recent slowdown in EV demand. Prior to the cancellation of the Turkish factory, LGES had postponed the start of operations for its Ultium Cells factory 2 in Tennessee, which it was constructing with General Motors (GM). Originally scheduled to begin operations by the end of 2023, the delay was again attributed to slower-than-expected growth in EV demand.

Similarly, SK on postponed the operational start date for its own joint venture with Ford for the BlueOval SK factory in Kentucky, which was initially due to be completed by 2026.

According to Bloomberg New Energy Finance (BNEF), the global EV battery demand growth rate, which nearly doubled in 2021, slowed to 68 percent last year and dropped further to 45 percent in 2023.

The automotive industry is witnessing a withdrawal of EV investments, particularly among North American automakers. Ford, for instance, announced the postponement of $120 billion out of a planned $150 billion investment in its EV business. GM recently canceled a joint development project for budget-friendly EV models with Honda. Meanwhile, Volkswagen Group shelved plans for constructing an EV-specific factory in Wolfsburg, Germany, by 2026, and the construction of a battery production plant in Eastern Europe has also been indefinitely postponed.

By Jung You-jung, Park Je-wan, Song Min-geun, and Minu Kim

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]