Korean Media: "Second Battery Shock" on Trump... Ford and LG Energy Dissolve 9 Trillion Won Contract
US Canceled Tax Credit, Ford "Reducing Electric Vehicle Production," LG Energy's 9.6 Trillion Won Battery Supply Vanishes, Ford Shifts Focus to Fuel Vehicles... Ending Partnership with SK On
On the 17th, LG Energy Solutions announced that it had terminated a 96,000 billion won (approximately 45.7 billion yuan) electric vehicle battery supply contract with the US automaker Ford. Analysts believe that the underlying reason is that the US canceled the tax credit previously applicable to electric vehicle purchases, prompting Ford to adjust its strategy for electric vehicle business. Ford also decided to end its joint venture relationship with SK On, driven by concerns about the prolonged stagnation of electric vehicle demand known as the "Battery Chasm."
On the same day, LG Energy Solutions stated: "We have terminated the electric vehicle battery supply contract with Ford disclosed on October 15, 2024," adding, "the reason is that the transaction partner (Ford) has decided to stop producing certain electric vehicle (EV) models." In response, public opinion commented that while adjusting business plans due to market conditions or strategic changes is common, terminating a long-term supply contract of nearly 10 trillion won is quite rare.
The long-term battery supply contract signed between the two parties in October 2024 stipulated that 75 GWh (gigawatt-hours) would be supplied over six years until 2027, and another 34 GWh from the following year until 2030. All batteries would be produced at LG Energy Solutions' Wroclaw factory in Poland, planned to be used in electric vehicles for Europe. The current termination involves the contract from 2027-2032, amounting to 96,030 billion won.
Recently, the US canceled tax credit benefits applicable to electric vehicle purchases, prompting Ford to adjust its business strategy, shifting focus to more profitable hybrid and fuel vehicles. At the same time, it has stopped production of the increasingly sluggish large electric pickup truck F-150 Lightning, and instead expanded low-cost electric vehicle and energy storage system (ESS) businesses. It is expected that by 2027, Ford will bear pre-tax costs of approximately 19.5 billion USD (about 28.8 trillion won).
There are concerns that Ford's above-mentioned strategic adjustments may impact the entire battery industry. On the 11th, SK On announced the separation of the battery production company "BlueOval SK" jointly established with Ford in the US, with production facilities now independently owned and operated. SK On will independently operate the Tennessee plant, while Ford will independently operate the Kentucky plant.
Source: Chosun Ilbo
Original: toutiao.com/article/1851897680332800/
Statement: This article represents the views of the author.