LGES And SK On Lay Off Workers As EV Battery Market Needs A Correction
The lithium-ion EV battery market appears to be on the verge of correction in the U.S., after a few years of rapid growth with multi-billion investments.
There is no doubt about the growth in the EV segment, however, the expansion is not as fast and smooth as initially planned. Because of that, some of the EV battery manufacturers are following carmakers and are scaling back/delaying their investments in new battery factories.
According to the Financial Times, two South Korean battery manufacturers—LG Energy Solution and SK Innovation’s SK On—recently slightly reduced their workforce in the U.S.
In the case of LG Energy Solution, the layoffs concern 170 workers at its plant in Michigan, while SK On laid off more than 100 workers at one of its two plants in Georgia in September. This comes on top of the delays at SK On’s joint project with Ford in Kentucky.
We would not be worried about the long-term growth in the EV segment, especially since the U.S. market is significantly behind Europe and China in terms of all-electric car share out of new car sales. However, a correction is a natural thing, especially in an environment where the entire industry rushed to build gigafactories.
Earlier this year, we reported about nearly 1,000 gigawatt-hours of annual EV battery manufacturing capacity (new plants) planned in North America by 2030. The investments in new plants were supported by the Inflation Reduction Act of 2022 (IRA), which introduced generous subsidies as well as requirements of local production to be eligible for EV incentives.
Both, the LGES and SK On are expected to produce and sell more EV batteries than ever before, but in the near term, there might be adjustments. For example, Panasonic is building a new plant in the U.S. but had to cut its battery output (of a specific cell type used by Tesla in the Model S and Model X – the 1865-type) in Japan.
Overall, the foundation for a large EV battery industry in the U.S. has been laid and the majority of the investments are expected to be completed. There will be ups and downs, on a long path of electrification. Let’s remember that the all-electric vehicle market and battery production must increase by an order of magnitude to get closer to 100% electrification.
