EV batteries from LG Energy Solution (Photo courtesy of LG Energy Solution)
LG Energy Solution announced that its 4 trillion won electric vehicle battery supply contract with U.S. battery pack manufacturer Freudenberg Battery Power System (FBPS) has been terminated. Including last week’s 9.6 trillion won contract with U.S. automaker Ford, over 13 trillion won worth of contracts have been nullified within a week. While domestic battery companies are seeking breakthroughs in the growing energy storage system (ESS) sector, the impact remains substantial.
LG Energy Solution announced on Dec. 26 that it would mutually agree to terminate the electric vehicle battery module supply contract signed with FBPS in April last year due to FBPS’s withdrawal from the battery business. The termination amount is approximately 3.9217 trillion won based on the exchange rate on the disclosure date, representing the remaining portion of the total contract value of $2.795 billion excluding already fulfilled quantities ($110 million).
FBPS had planned to operate a battery pack assembly plant in Midland, Michigan, receiving battery modules from LG Energy Solution to supply North American commercial vehicle companies with electric buses and electric trucks. However, due to the electric vehicle chasm (temporary demand slowdown) fallout, the company decided to withdraw from the battery business and terminate its contract with LG Energy Solution.
Previously, LG Energy Solution terminated a 9.6 trillion won contract on Dec. 17 to supply electric vehicle battery cells and modules to U.S. automaker Ford from 2027 to 2032. Ford modified its strategy to focus on hybrid vehicles and internal combustion engine vehicles, canceling production of some electric vehicle models due to the abolition of U.S. electric vehicle subsidies and the prolonged electric vehicle chasm.
LG Energy Solution emphasized that while the order backlog decreased due to the contract termination with FBPS, the actual financial impact would not be significant. The contract involved supplying standardized battery modules that could be manufactured on existing production lines. An LG Energy Solution official explained, “Since no dedicated facility investment or research and development costs were involved, there are no investment losses or additional costs arising from the contract termination.”
LG Energy Solution is using the ESS market as a breakthrough. This year, the company converted its Michigan plant in the U.S. to an ESS battery production facility, beginning early mass production in June, one year ahead of schedule, and also converted production lines at joint ventures in Poland and Canada to ESS use, starting mass production of LFP batteries.
