Ford Cancels Major $6 Billion Battery Supply Deal with LG Energy Solution
In a significant development for the electric vehicle industry, South Korea's LG Energy Solution announced on Wednesday that a major battery supply agreement with Ford Motor Co. has been terminated. The cancellation comes as the US automaker revises its electric vehicle strategy in response to changing market conditions and policy shifts.
Contract Details and Financial Impact
According to regulatory filings and reports from Pulse, the English service of Maeil Business News Korea, Ford issued a formal cancellation notice for the contract valued at approximately 9 trillion won ($6.09 billion). The terminated deal involved the supply of 75 gigawatt-hours of batteries over a six-year period, with deliveries scheduled between 2027 and 2032.
This contract represented a substantial portion of LG Energy Solution's business, accounting for around 28.5 percent of the company's recent annual revenue. The cancellation marks one of the largest contract terminations in the EV battery sector in recent years.
Strategic Shift Behind the Termination
LG Energy Solution stated that the termination followed Ford's decision to halt production of certain electric vehicle models amid changing policy conditions and a weaker outlook for EV demand. The company explained that Ford has been adjusting its electrification plans and rebalancing its vehicle portfolio in response to market realities.
An official from LG Energy Solution confirmed that some projects in the order pipeline were dropped as part of Ford's strategic realignment. This decision reflects broader challenges facing the electric vehicle industry, including shifting consumer preferences and regulatory changes.
Broader Context of the Ford-LG Partnership
The two companies had previously outlined a more extensive battery supply arrangement. In October 2024, they agreed on a long-term partnership worth 13 trillion won ($8.86 billion) to supply batteries for approximately one million electric vehicles, structured in two distinct phases.
While the first phase has now been cancelled, the second phase remains active. This ongoing agreement covers the supply of 34 gigawatt-hours of batteries between 2026 and 2030. These batteries will be produced at LG's facility in Poland and used specifically in Ford's E-Transit electric delivery vans.
Ford's Evolving Electric Vehicle Strategy
Ford's decision to terminate the battery contract aligns with several strategic shifts within the company:
- Focus on Hybrid and Internal Combustion Models: Following the rollback of EV tax incentives under the Donald Trump administration, Ford has redirected resources toward hybrid vehicles and traditional internal combustion engine models.
- Prioritizing Smaller, More Affordable EVs: The automaker is now emphasizing the development of smaller, more cost-effective electric vehicles that appeal to budget-conscious consumers.
- Energy Storage Systems: Ford is also expanding its focus to include energy storage solutions, recognizing additional revenue opportunities beyond vehicle manufacturing.
- Profitability Concerns: The company has cited significant profitability challenges for larger electric vehicles as a key factor in its strategic reassessment.
This termination highlights the ongoing volatility in the electric vehicle market as automakers navigate changing consumer demand, regulatory environments, and economic realities. Both companies will need to adjust their strategies in response to this significant contract cancellation and the broader industry transformation underway.
