Slowing demand for electric vehicle batteries predicted by LG Energy Solution due to impact of US tariffs and policy obstacles
LG Energy Solution Navigates EV Battery Demand Challenges and Shifts Focus to Energy Storage Systems
LG Energy Solution (LGES) has warned of a slowdown in electric vehicle (EV) battery demand in the US early next year due to ongoing tariffs and the scheduled end of federal EV purchase subsidies on September 30, 2025. These factors, combined with rising interest rates and reduced government incentives, are expected to increase vehicle prices, burden automakers, and slow EV growth in North America.
As a result, some automakers are adjusting production plans, reflecting cooling consumer demand. In response, LGES is shifting its strategic focus towards energy storage system (ESS) batteries. The company is accelerating production capacity for stationary storage solutions in the US and North America to capture rising demand in renewable energy and data centers.
The policy changes, such as the U.S. Inflation Reduction Act’s (IRA) Investment Tax Credit (ITC), are seen by LGES as opportunities to incentivize supply chain shifts towards non-Chinese battery suppliers, strengthening local production and competitive barriers against prohibited foreign entities. This regulatory environment may reinforce US-based battery producers' advantages despite short-term EV market headwinds.
LGES has already started expanding ESS battery production, aiming for a 17 GWh annual capacity by the end of 2025 in North America. This includes the mass production of Lithium Iron Phosphate (LFP) battery cells at its Michigan plant ahead of schedule. LGES's operating profit more than doubled in the second quarter, reaching 492 billion won ($358.73 million), compared to 195 billion won in the same period last year.
Despite the potential slowing demand for EV batteries, LGES is optimistic about the future. The company operates a plant that, at full capacity, could generate subsidies worth approximately 2 trillion won ($1.5 billion). LGES is the only player in the US market capable of supplying LFP-based ESS, providing it with a significant advantage due to the lack of competition.
However, LGES shares experienced a 1.6% decrease in trading after the earnings announcement in morning trade. The benchmark KOSPI index rose by 0.3% while LGES shares were trading. The news source for this report is unspecified.
In summary, LG Energy Solution foresees a challenging EV battery demand outlook in the US in the near term due to tariffs and policy uncertainties but is mitigating risk by expanding into the growing ESS market and leveraging policy incentives for local manufacturing.
- As LG Energy Solution is shifting its strategic focus towards energy storage system (ESS) batteries, the company is anticipating rising demand in renewable energy and data centers, which are key sectors within the technology industry.
- In response to policy changes such as the U.S. Inflation Reduction Act’s (IRA) Investment Tax Credit (ITC), LG Energy Solution views this as an opportunity to strengthen local production and competitive barriers against prohibited foreign entities in the industry of finance and technology.
