Major Shake-Up in EV Battery Supply Pact
Ford Motor Company has officially backed out from its $6.5 billion electric vehicle (EV) battery supply contract with South Korea’s LG Energy Solution, indicating a major strategic shift in the automaker’s EV strategy. The deal, announced in October 2024, would have had LG provide batteries to Ford’s commercial EVs beginning in 2026 and 2027 through a long-term supply contract.
LG Energy Solution said in a regulatory filing that Ford had formally informed LG of the contract’s cancellation. Under an existing deal, LG has been selected to manage the $6.5 billion contract investment scheduled for Ford’s forthcoming European electric vehicle products. The batteries were to be made at LG’s factory in Poland and shipments were due to extend into the latter part of this decade.
The battery contract was a big revenue opportunity for LG Energy Solution, making up 30% to 40% of its annual revenue. The end has already had financial consequences, as LG’s share price tumbled after the announcement.
Ford’s Strategic EV Reset and Market Pressure
The cancellation is part of a broader strategic reset of Ford’s electric vehicle plans. The U.S.-based automaker has been rethinking its strategy around electric vehicles amid changing policies, changing consumer tastes and changes in the EV market value. As part of the reassessment, Ford also announced that it would stop offering production of some of its EV models and take a large $19.5 billion writedown on its EV business. The policy shifts reflect a pulling back by the company from its ambitious electrification plan toward a more tentative, mixed strategy that includes hybrid and other alternative fuel vehicles.
Industry watchers see Ford’s move as reflective of a wider shift to recalibration among large automakers, who are grappling with increasing overheads for development infrastructure, slower-than-predicted uptake of EVs and unclear regulatory incentives. The cancellation of the LG battery contract also comes on the heels of Ford’s decision to terminate its U.S. partnership with South Korea’s SK On for batteries, which again emphasises the move in battery supply chain strategy for EVs that is taking place at Ford.
As the EV market moves into its more “uncertain and contested phase,” Ford’s recent decisions amount to an internal recalibration as well as broader industry pressures that are shaping what it means to build future electric vehicles around the world.
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