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South Korea’s LGES Says Inflation Puts US Battery Plant in Doubt

LGES, South Korea’s biggest player in the booming market for EV batteries, counts Tesla, General Motors and Volkswagen among its customers.


The wilting US economy has forced South Korea's LG Energy Solution (LGES) to take another look at its plan to make EV batteries in Arizona.
LGES said in March the plant would be its first US factory to make cylindrical cells, a type of battery that has been used in Tesla and Lucid vehicles. File photo: Reuters.

 

The wilting US economy has forced South Korea’s LG Energy Solution (LGES) to take another look at its plan to build an electric vehicle (EV) battery factory in Arizona.

The company said no decisions have been made on the $1.3 billion plan, which was unveiled in March.

LGES, South Korea’s biggest player in the booming market for EV batteries, counts Tesla, General Motors and Volkswagen among its customers.

LGES is also planning to make EV batteries for GM at new plants in the US states of Ohio, Tennessee and Michigan and seeks to expand its existing factory in Michigan.

Shares in LGES fell as much as 4.3% in early trading, while the benchmark Kospi index was down 1.9%.

 

Elevated US Inflation

Analysts attributed the review of the Arizona investment to elevated US inflation, running at its highest level in more than four decades, which could lead to rising costs for materials, construction, as well as labour.

“At this point, it would be unlikely for LGES to withdraw its Arizona investment, [but] the company needs to reassess its profitability forecast amid rising cost due to inflation,” Cho Hyun-ryul, an analyst at Samsung Securities, said.

The statement comes just three months after LGES announced plans to make EV batteries in Arizona by 2024 to meet demand from startups and other North American customers.

LGES said in March the plant would be its first US factory to make cylindrical cells, a type of battery that has been used in Tesla and Lucid vehicles.

Construction was to begin in the second quarter of 2022, it said, with mass production to start in 2024.

LGES also has production sites in South Korea, China, Poland, Canada and Indonesia.

 

  • Reuters, with additional editing by George Russell

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.