LG Energy Solution suspends construction of ESS line in Arizona as EV market stalls

LG Energy Solution has halted construction of its battery production line for energy storage systems (ESS) in Arizona seven months after breaking ground in a chain response to the stalling EV market.

A graphic image of LG Energy Solution's's planned battery production complex in Arizona [LG ENERGY SOLUTION]

LG Energy Solution has halted construction of its battery production line for energy storage systems (ESS) in Arizona seven months after breaking ground in a chain response to the stalling EV market.

“LG Energy Solution is adjusting the pace of planned investment execution efficiently and flexibly according to market conditions and focusing on optimizing our operations,” the battery maker said Friday in its notice that it has temporarily suspended construction of the Arizona ESS battery facility. However, the company said the construction of its cylindrical EV battery facilities in Arizona is proceeding as planned.

The halt in ESS production follows stagnant growth in the EV market, which some experts and LG Energy Solution interpret as the “chasm” stage before widespread EV adoption.

LG Energy Solution has reportedly been transitioning some of its EV battery production lines to produce ESS instead at European and U.S. factories, with demand for EVs failing to meet expectations. With ESS production coming from existing facilities, the firm is diverting from additional operations for now.

LG Energy Solution announced last year a 7.2 trillion won ($5.5 billion) investment to build a battery manufacturing complex in Arizona. The complex would include the company’s first stand-alone cylindrical and ESS battery plants in North America.

The ESS facility was to produce lithium iron phosphate (LFP) pouch-type batteries for ESS with an annual capacity of 16 gigawatt hours (GWh). Production was set to start in 2026.

ESS are commonly used in power plants, power transmission and distribution facilities to increase the efficiency of renewable energy and reduce electricity costs.

LG Energy Solution did not specify when construction would resume or when it plans to start production at the ESS facility.

The battery maker said it nevertheless “expected continued growth in the U.S. ESS market” in its Friday statement, saying that the now-halted facility will “play an important role in [their] North America operations.”

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]