Gary Zhou 
Key Points
- 🌐 LG Energy Solution and SK On are laying off workers due to reduced EV investments in North America.
- 🔍 LGES is laying off 170 workers at its Michigan plant, citing automakers realigning the speed of the EV transition.
- 📉 Concerns about overcapacity arise in the EV sector as investments outpace the transition to EVs.
- 💼 SK On, in partnership with Ford, plans worker furloughs and output reduction in its Georgia plant.
- 🌍 The global economy’s uncertainty prompts caution from automakers, including Ford and Tesla, in their expansion plans.
- 🚗 Ford scales back plans for its new Michigan EV battery plant, and Tesla hints at potential delays in its Giga Mexico plans.
- 🇺🇸 LGES and SK On have joint ventures with major U.S. automakers, including Tesla, Ford, and General Motors.
- 💡 The slowdown in EV investments is attributed to sluggish demand in the electric vehicle market.
LG Energy Solution (LGES) and SK On are laying off workers as it reduces electric vehicle (EV) investments in North America. The South Korean battery suppliers are slowing their expansion in North America due to sluggish demand in the electric vehicle market.
LG Energy Solution announced it would be laying off 170 workers at its Michigan plant this month. The South Korean battery supplier stated it would lay off almost 10% of the employees in its wholly owned site in Holland, Michigan. LGES explained that the layoffs are due to “automakers realigning the speed of the EV transition.”
The Biden Administration’s Inflation Reduction Act (IRA) has spurred investments in EV and battery manufacturing in North America. Some analysts believe the investments are moving faster than the transition to EVs.
“The market seems to be going through a correction,” said Lee Hang-koo, president of Jeonbuk Institute of Automotive Convergence Technology (JIAT). “There is growing concern about overcapacity, as too much investment has been made in the sector in a short period of time.”
LGES has joint ventures and partnerships with top automakers in the United States, including Tesla, Ford, and General Motors. Fellow South Korean battery maker SK On also has deals in the United States, specifically with Ford.
SK On and Ford signed a $11 billion deal in 2021. Recently, SK On announced plans to put workers on furlough while it reduces output in its Georgia plant. The Asian battery supplier laid off over 100 workers in Georgia in September. It also plans to delay the launch of its second plan in Kentucky, a joint venture with Ford. The Kentucky plant was expected to be operational by 2026.
Automakers have also started to be more cautious with their expansion plans. Ford recently scaled back its plans for its new Michigan EV battery plant, reducing the estimated jobs it would offer and decreasing its output capacity. Even Tesla hinted at delaying its plans for Giga Mexico at its last earnings call.
“And in Mexico, we’re laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for the global economy is like before we go full tilt on the Mexico factory. I am worried about the high interest rate environment that we’re in,” said Elon Musk during the Q3 2023 earnings call.
