Ford in talks with LG Energy for Turkey EV battery plant

Ford Motor Co. is in talks with LG Energy Solution Ltd., the world’s second-largest electric vehicle battery maker, to build a cell factory in Turkey after withdrawing from a deal with South Korea’s SK On Co., as the US automaker aims to speed up its expansion in the global No. 2 EV market.

Ford and South Korea’s LG Energy are scheduled to sign a memorandum of understanding in the coming weeks, probably in late January or early February, according to industry sources in Seoul on Monday.

That came as SK On, LG Energy’s smaller rival, canceled a preliminary agreement with Ford and a Turkish investment holding company Koç Holding AS to establish a 4 trillion won ($3.2 billion) EV battery plant in the country lying partially both in Asia and Europe. SK On, Ford and Koç had planned to produce 30 to 45 gigawatt-hours (GWh) per year starting in 2025 from the factory to meet Europe’s growing EV demand.

SK On, the world’s fifth-largest battery maker, scrapped the plan due to difficulties in funding amid rising interest rates and the slow improvement in the rate of defects among manufactured products at its Hungary plant.

BATTERY MAKERS WITH STRONG FINANCIAL CONDITIONS, QUALITIES

Shares in LG Energy rose as much as 4.3% to 484,000 won on Tuesday morning in the South Korean stock market, far outperforming a 0.4% gain in the main Kospi after the news.

The talks between Ford and LG Energy indicated growing moves among automakers to seek battery partners with strong financial conditions and excellent qualities for business expansion, industry sources said.

“Major battery makers with technical competitiveness will be in the spotlight, while other companies could even face the risk of bankruptcy,” said one of the sources. “That will be a key issue in the industry from this year.”

The cell makers sought by automakers include South Korea’s LG Energy and Samsung SDI Co., as well as China’s Contemporary Amperex Technology Co. Ltd. (CATL), according to sources.

LG ENERGY, SAMSUNG SDI

LG Energy is already operating a joint battery factory with General Motors Co. in the US and building two more in the world’s third-largest EV market. The South Korean company is seeking partnerships with other major automakers such as Hyundai Motor Co., Honda Motor Co. and Renault Group. The battery maker is also in talks with Toyota Motor Corp. for a battery supply deal.

Those automakers rushed for cooperation with LG Energy especially in the US as Washington’s measures to bolster the domestic EV industry are expected to ramp up demand for the eco-friendly vehicles.

That allowed LG Energy to enjoy the luxury of reconsidering a plant investment in Arizona.

“We are having a tug-of-war with automakers for supplies with favorable conditions such as prices amid overwhelming demand,” said an LG Energy official.

Last year, the company reported record earnings as an operating profit jumped 57.9% to 1.2 trillion won with sales up 43.4% to 25.6 trillion won.

Samsung SDI is also seeing such a boom. The world’s No. 6 battery maker is in initial talks with GM for a supply deal, according to investment sources in Seoul.

GM is likely to seek Samsung SDI’s cylindrical batteries as the US carmaker last year started its own energy storage business, those sources said.

On the other hand, battery makers with funding problems and quality issues are struggling although the global EV market kept growing. Battery makers need time to improve the rate of defects among manufactured products when they open new plants, but few EV makers can afford to wait.

UK battery startup Britishvolt is in talks to sell the majority of its stake to investors as it has had difficulty in raising money for a factory, media reported. In China, smaller makers, which were set up during the EV boom in the world’s top automobile market, are likely to gradually face restructuring, analysts said.

Write to Hyung-Kyu Kim at khk@hankyung.com
Jongwoo Cheon edited this article.