Job losses at battery companies mark cost of slowing EV transition

Electric vehicle battery companies have cut hundreds of jobs over the last few months, an effect of the automotive industry recalibrating the timeline for the EV transition.

Our Next Energy has cut about 128 salaried and hourly workers, including 82 in Michigan; LG Energy Solution plans to lay off 170 workers at a Michigan plant; and SK On has dismissed more than 100 workers in Georgia. Freyr Battery laid off 78 staffers in Norway and Georgia, and Enovix cut 185 workers in California.

Many automakers have "either paused or pulled back on EV-related spending, and that's trickling down into the supply chain and in particular the battery segment," said Gabe Daoud, an analyst at TD Cowen.

Reality has set in for the U.S. EV industry as it deals with consumers who are "reticent" to give up gasoline cars, he added.

Revisions to timelines have had cascading effects on the battery sector, especially for companies with direct automaker deals. Those include LG Energy Solution, which has joint ventures with General Motors, Honda and Hyundai, and SK On, which has partnerships with Ford and Hyundai.

Even as suppliers cut personnel, investment in battery production capacity is solid, according to the companies. They view the delays as a momentary setback rather than an existential threat.

While LG said production line changes and "automakers realigning the speed of the EV transition" forced the layoffs, it is on track to start production of lithium iron phosphate cells by 2026 and cheaper and safer manganese-rich batteries and denser and longer-lasting lithium manganese iron phosphate chemistries by 2027.

SK On said it will invest $1.1 billion to build a third manufacturing site in Seosan, South Korea.

Battery startups raised $4.9 billion in August and September from institutional investors.

The simultaneous layoffs and battery investments tell a nuanced tale of EV demand in the U.S.

While EV sales increased 68 percent from the third quarter of 2021 to 2022, that figure rose by only about 50 percent from the third quarter of 2022 to the same period in 2023, according to Kelley Blue Book. Automakers have responded by adjusting schedules and slowing spending.

Ford, for example, announced in October that it would delay production at a battery plant in Kentucky. GM said that same month it would push out several electric vehicle launches, including the Chevrolet Equinox EV, in part to "adjust to slower near-term growth in demand."

Analysts say these changes are consistent with vehicle affordability issues, high interest rates and inadequate charging infrastructure. Automakers were burned by making ambitious promises in 2020 and 2021 to keep up with Tesla, said Daoud, and now, they appear to have overpromised and underdelivered.

At the same time, U.S. EV sales set a record in the third quarter, exceeding 300,000. The Tesla Model Y was the sixth best-selling vehicle in the U.S. the third quarter of 2023, only narrowly behind the gasoline-powered Honda CR-V. Automakers and suppliers are optimistic that EV sales growth will pick up as the Biden administration creeps toward its goal of 500,000 public charging ports in the U.S. by 2030 and manufacturers release more affordable EV models such as the 2024 Fiat 500e, which starts at about $33,000.

“We do see that that growth is certainly still happening, and the question is how fast it will happen,” said Stephanie Brinley, an analyst at S&P Global Mobility. “It’s a level of flexibility that the industry has to work with, and it’s very difficult because that’s money; that’s investment; that’s going to be some company having some level of loss.”