South Korea’s LG Energy Solution (LGES) is reconsidering its plan to invest KRW1.7bn (US$1.3bn) in an electric vehicle (EV) battery plant in Arizona due to deteriorating business conditions, according to local reports citing a company statement.
Just three months ago, the world’s second largest EV battery manufacturer announced plans to build its second wholly owned battery plant in the US, a facility with the capacity to produce 11 gigawatt hours (GWh) of cylindrical batteries per year.
The company said rising costs due to high global inflation and the weakening won against the US dollar were the main reasons for it to reconsider its plans. Since the plant announcement in March, the estimated cost of the project has risen to over KRW2trn.
A company spokesperson reportedly said: “We are thoroughly reassessing the timing, scale and details of the investment, due to a sharp increase in investment costs stemming from the deteriorating business environment.”
The company subsequently said: “Given the unprecedented economic condition and investment in the US, LGES is currently reviewing various investment options, but no decision has been made.”
The company is investing heavily in the US in anticipation of a rapid rise in demand for EVs in the region.
Demand for cylindrical battery cells is expected to grow particularly strongly.
LGES already operates an EV battery plant in Michigan and, last March, it also announced a new battery manufacturing joint venture in Canada with Stellantis.
This was in addition to three planned joint venture plants with General Motors.
It had planned to have a production capacity of 200 gigawatt hours in North America by 2025, enough to power 2.5 million high-performance EVs, but this was clearly being reassessed.