U.S. automakers and Korean battery suppliers are undergoing a major course correction, scaling back EV ambitions and redirecting excess battery capacity toward rapidly growing energy‑storage markets amid shifting policies and demand.

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In December 2025, Ford Motor Co. and SK On announced plans to dissolve their $11.4 billion battery joint venture, BlueOval SK, as part of a broader restructuring driven by slowing demand for battery-electric vehicles (BEVs) and the expiration of government subsidies under the Inflation Reduction Act (IRA). The decision aimed to avoid compounding losses from EV battery operations in an environment marked by policy shifts away from BEVs and to rationalize capacity across their three plants by redirecting focus toward battery energy storage systems (BESS).

Ford sold 2.20 million vehicles in 2025, up 6% year-over-year from 2.07 million in 2024. Internal combustion engine (ICE) vehicles made up 86% of total sales, while hybrid electric vehicles (HEVs) accounted for 10% and BEVs for just 4%. Notably, HEV sales rose 22% year-over-year, but BEVs declined 14%, highlighting resilient demand for ICE models and a clear consumer shift toward hybrids. Reflecting these trends and increasing investor pressure, Ford undertook new measures to reallocate capital from loss-making segments to profitable ones, including its proven ICE portfolio.

As a result, Ford announced it would no longer pursue large BEVs, citing eroding business cases due to weakening demand, escalating development costs, and regulatory shifts. It subsequently wrote off $19.5 billion in EV investments. Ford officially ended production of the all-electric F-150 Lightning pickup and intends to transition it to an extended-range electric vehicle (EREV) architecture, citing lower-than-expected demand, high production costs, and difficulties making the platform profitable. This strategic retreat also resulted in Ford terminating its $6.5 billion battery supply agreement with LG Energy Solution (LGES).

How built-up capacity is shifting to battery energy storage system applications

With BlueOval SK dissolved, Ford plans to independently operate two battery plants in Kentucky, while SK On will take full control of the Tennessee facility. Ford aims to repurpose its Kentucky battery manufacturing capacity to meet rapidly growing demand for BESS, driven by the expansion of data centers and supporting grid infrastructure. The company intends to convert these facilities to manufacture more than 5 MWh of advanced BESS modules using licensed lithium iron phosphate (LFP) prismatic cells and 20foot DC container systems. Initial capacity is expected online within 18 months, and Ford plans to deploy at least 20 GWh of annual BESS production by late 2027, positioning itself to capture a meaningful share of the expanding US energy storage market.

Ford’s rival General Motors (GM) mirrored this strategic redirection. In a January 2026 regulatory filing, GM disclosed a $6 billion write-off in its North American operations for the quarter ending December 31, 2025. This stemmed from scaled-back EV development efforts, production cuts, and costs associated with canceling supplier contracts. GM had already recorded $1.6 billion in write-offs in Q3 2025. Prior to these adjustments, GM had reduced its battery-cell exposure by selling its stake in the Ultium Cells LLC Lansing plant to LGES.

Unlike Ford, GM’s actions represent a partial disengagement from LGES, maintaining the broader battery joint venture with South Korea’s largest cell manufacturer. Ultium Cells LLC continues to own and operate its Ohio and Tennessee plants. GM also postponed the launch of its upcoming $3.5 billion Indiana battery plant with Samsung SDI. Meanwhile, GM’s subsidiary GM Energy continues to operate in the stationary energy storage space and has partnerships with SunPower and Redwood Materials to supply BESS modules for power grid support.

Stellantis makes similar adjustments

Stellantis, the third member of the Detroit Three, recorded a €22.2 billion charge in the second half of 2025 as it walked back earlier BEV transition plans. This included €2.1 billion linked to resizing its EV supply chain and rationalizing excess battery capacity. Part of this process included Stellantis’ sale of its 49% stake in NextStar Energy to LGES, enabling the latter to assume full ownership of the joint venture. Under LGES, NextStar Energy will now serve a wider customer base, including the growing BESS segment.

Meanwhile, StarPlus Energy — the Stellantis–Samsung SDI battery joint venture — is shifting production priorities to include BESS. This adjustment responds to concerns over EV battery overcapacity, especially following the expiration of IRA tax credits in late 2025. StarPlus Energy’s Indiana plant, opened in December 2024 with a 23 GWh capacity (scalable to 33 GWh), is already allocating more production lines to BESS. Of its four lines, three are now dedicated to BESS and one to EV batteries.

One operational line currently produces nickel-cobalt-aluminum (NCA) batteries for energy storage, while the EV-focused line is expected to begin producing NCA batteries for Stellantis vehicles in early 2026. The second StarPlus plant, opening in early 2027, is also expected to balance battery production between BESS and EV applications.

How South Korea’s EV battery suppliers are reshaping the electric vehicle battery supply chain

Shrinking BEV demand, excess battery capacity, and the loss of US subsidies are pushing LGES, SK On, and Samsung SDI to repurpose capacity toward BESS. These companies were already active in the US BESS market but are now accelerating their shift by reallocating production from EV batteries to energy storage solutions.

In December, Samsung SDI signed a three-year deal with an undisclosed US customer to supply prismatic LFP batteries for BESS applications starting in 2027. Valued at more than 2 trillion won (about $1.4 billion), the contract represents Samsung SDI’s first large-scale move from highnickel NCA batteries to cost-efficient LFP chemistries — a trend increasingly adopted by LGES and SK On as well.

SK On, aiming to expand in the US BESS market, secured a multiyear supply deal in September 2025 with Flatiron Energy Development. The agreement covers up to 7.2 GWh of BESS supply, with deliveries beginning in late 2026.

LGES began mass-producing LFP batteries for BESS in June 2025 at its Holland, Michigan facility. Its US subsidiary, LG Energy Solution Vertech, has signed agreements with multiple customers, including TerraGen and Delta Electronics, to supply ESS LFP batteries.

S&P Global Mobility battery energy storage system outlook

While the shift toward BESS is driven primarily by declining US BEV demand, it also reflects rising opportunities in AI data centers, grid stabilization, renewable energy integration, backup power, and microgrid applications. Repurposing existing battery lines not only helps manufacturers manage EV-market volatility but also reduces idle capacity costs, enhances operational flexibility, and opens new fast-growing revenue streams.

Ali Adim, Head of Battery Research at S&P Global Mobility, explained, “South Korean manufacturers hold a dominant position in the North American market, supplying approximately 45% of battery cells and 57% of cathode active materials. As a result, they have been disproportionately exposed to the recent downturn in demand following the removal of the 30D electric vehicle tax credit.

The energy storage systems (ESS) segment offers a partial hedge against weakening EV battery demand, particularly in light of generous manufacturing tax credits that have been preserved under Trump’s recently passed budget bill. However, the predominance of iron-based chemistries in stationary storage presents structural challenges for Korean producers, including limited expertise in LFP technology and weaker price competitiveness relative to [mainland] Chinese rivals.” 

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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