Exodus of U.S. clients pushes Korean battery makers to the brink

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Exodus of U.S. clients pushes Korean battery makers to the brink

Published: 27 Dec. 2025, 15:37 Updated: 28 Dec. 2025, 17:28

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

LG Energy Solution’s plant in Michigan [LG ENERGY SOLUTION]

Korean battery manufacturers find themselves at a critical crossroads, as global clients — reeling from a prolonged slump in EV demand — have walked away from previously pledged multibillion-dollar contracts.

While firms are seeking to pivot toward the relatively less-regulated EV market of Europe and the energy storage system (ESS) segment, this recalibration offers little room for optimism due to the ubiquitous presence of low-cost Chinese products.

LG Energy Solution has already seen some 13.6 trillion won ($9.6 billion) in deals evaporate this month alone, an amount exceeding half of the company’s total revenue last year, which stood at 25.62 trillion won.

LG Energy Solution's battery plant under construction in Arizona [LG ENERGY SOLUTION]

Korea’s largest battery maker announced the termination of a contract with U.S.-based battery pack producer Freudenberg e-Power System valued at 3.92 trillion won on Friday.

The cancellation applies to the portion of the deal yet to be fulfilled, excluding deliveries already completed worth $110 million, out of the total contract value of $2.79 billion. In effect, nearly 96 percent of the original agreement has been scrapped, making the termination tantamount to a wholesale collapse of the deal.

The latest termination originated from Freudenberg's decision to exit the battery business due to sluggish demand. Under the original plan, the U.S. firm planned to assemble battery modules produced by LG Energy Solution into complete battery packs and supply them to major North American commercial vehicle manufacturers, including those producing large buses and electric trucks.

Earlier on Dec. 17, LG Energy Solution also disclosed the cancellation of a $6.5 billion deal with Ford Motor.

The termination is widely attributed to the contraction of the North American EV market, triggered by the Donald Trump administration’s decision to roll back the $7,500 EV tax credit. With subsidies withdrawn, automakers have increasingly scaled back their commitment to EVs, dampening demand across the supply chain.

SK On engineers pose with pouch-type batteries [SK ON]

Ford suspended production of the F-150 Lightning electric pickup and has recalibrated its strategy to prioritize higher-margin hybrid models and internal combustion engine vehicles.

LG Energy on Wednesday also moved to shore up liquidity by selling buildings, equipment and other assets of its U.S. joint venture with Honda to the Japanese automaker's U.S. subsidiary for about 4.2 trillion won.

Earlier in December, Ford also ended its joint venture with SK On, which initially promised to invest $11 billion to build three plants in Kentucky and Tennessee.

Under the revised arrangement, SK On will assume sole control of the Tennessee plant, while Ford will independently operate the two Kentucky plants, where it will license CATL’s low-price battery technology into the factory.

Korean battery makers view the European ESS market as a potential breakthrough, but mounting uncertainties are clouding the outlook due to the inflow of Chinese batteries, which are reportedly priced at less than half the cost of their Korean counterparts.

In the low-cost lithium iron phosphate (LFP) battery segment, China currently maintains a substantial technological lead, while Korean players continue to trail in terms of maturity and scale.

“ESS demand lacks continuity and is largely transactional, which makes it extremely difficult to establish stable production plans,” said analyst Lee Choong-jae of Korea Investment Securities.

“With raw material prices fluctuating on a daily basis, manufacturers cannot keep facilities running continuously by building inventory in advance without any sight of a sale,” Lee added. “With LFP having already emerged as the industry standard, Korean companies must seriously ask themselves whether they can still secure meaningful competitiveness in a scenario in which the United States lowers tariffs for Chinese products.”

The combined market share of Korea’s three major battery manufacturers in the European EV battery market stood at 35 percent between January and October this year, marking a 10 percentage point decline from the level recorded at the end of 2024, according to SNE Research.

During the same period, Chinese brands claimed 64 percent.

BY SARAH CHEA [[email protected]]