Ultium Cells halts construction of Michigan plant amid market slump

A rendering image of the third Ultium Cells battery plant in Lansing, Michigan (Ultium Cells)

Ultium Cells, the joint electric vehicle battery venture between LG Energy Solution and General Motors, has suspended the construction of its third electric vehicle battery plant in the US.

This decision comes in response to rising economic pressures, including high interest rates and inflation, as well as a slowdown in the demand for EVs.

The $2.6 billion facility in Lansing, Michigan, broke ground in 2022 and was scheduled for completion by the end of this year. Once operational, the plant was expected to start mass production early next year and eventually achieve an annual capacity of 50 gigawatt-hours. This output would be sufficient to power approximately 600,000 high-performance EVs capable of traveling over 500 kilometers on a single charge.

However, the current market and economic climate have necessitated a pause in construction.

“We’re taking a step back to reassess the situation. The company plans to resume construction once it has a clearer understanding of market conditions and future demand,” said an official from LG Energy Solution.

This move is part of a broader trend among automakers and battery manufacturers adjusting their strategies in light of the so-called "EV chasm" -- a temporary stagnation in EV demand. For instance, GM has lowered its EV production target for this year to between 200,000 and 250,000 units, which is 50,000 fewer than initially planned. Meanwhile, Ford has shifted some of its focus back to internal combustion engine vehicles, and Tesla has delayed its new factory project in Mexico.

Battery manufacturers are feeling the impact as well. LG Energy Solution, for example, has also paused construction on a dedicated lithium iron phosphate energy storage solutions battery plant in Arizona, just two months after breaking ground.

Despite these challenges, Ultium Cells continues to progress with its other facilities. The company currently operates two plants in the US -- one in Ohio and another in Tennessee. In April, the Tennessee plant delivered its first batch of battery cells, which will be used in GM's latest EV models, including the Chevrolet Equinox EV and the Cadillac Lyriq.

LG Energy Solution is expected to provide more detailed insights into its investment plans and the future of the Lansing plant during its second-quarter earnings announcement this Thursday.

By Moon Joon-hyun(mjh@heraldcorp.com)