South Korean battery firms secure crucial contracts amid demand slump
- South Korean companies are forming partnerships in Europe and the U.S. to navigate a slump in battery demand.
- SK On secured a $1.4 billion contract to supply ESS batteries, while LG Energy Solution signed a $10.8 billion contract with Mercedes-Benz.
- The global battery industry faces challenges from weak EV sales and the discontinuation of EV subsidies in the U.S.
In South Korea, companies have been facing a significant slowdown in the battery industry, as evidenced by recent developments in September 2025. In a strategic move to navigate these challenges, South Korean firms have initiated partnerships with major corporations in Europe and the United States to sustain their market positions. SK On, for instance, has signed an agreement to supply 7.2 gigawatt-hours of energy storage system (ESS) batteries from 2026 to 2030 for Flatiron's projects in New England, among other states, with the contract valued at approximately $1.4 billion. This deal is a vital step for SK On, expanding its portfolio and reflecting its commitment to enhancing their footprint in the ESS sector through advanced technology and production capacity. Meanwhile, LG Energy Solution, another leading South Korean battery manufacturer, secured two substantial contracts worth $10.8 billion with Mercedes-Benz, aimed at providing 107 gigawatt-hours of battery capacity between 2028 and 2037. This is particularly notable considering the backdrop of stagnant demand for rechargeable batteries, primarily driven by underwhelming electric vehicle (EV) sales that have not met initial forecasts. While the EV market has seen growth in China, the global landscape, particularly in Europe and the United States, has remained sluggish, which poses a significant obstacle to Korean battery manufacturers. The challenges are anticipated to worsen, as the United States is set to discontinue its EV subsidies, adding more pressure on the battery sector, which is already grappling with low consumer interest due to the high costs associated with electric vehicles in comparison to traditional combustion engine cars. Analysts predict that battery makers might concentrate their efforts on the burgeoning ESS markets, which are fueled by increasing investments in artificial intelligence infrastructure. However, concerns about the decline of direct purchase incentives in several European countries contribute to the overall uncertainty in the battery industry. Reports from the Korea Institute for Industrial Economics and Trade also suggest that military drones and humanoids could emerge as new potential markets for battery firms, indicating a pivot towards innovative applications amidst traditional market challenges. The ongoing situation reveals a complex landscape where both SK On and LG Energy Solution view their recent contracts as timely opportunities to keep their business viable in an environment rife with adversity, showcasing the ongoing struggle to balance production capabilities and market demands within the evolving battery industry.