LG Energy Solution: The EV battery market in 2025 stands at a critical inflection point. The rapid growth driven by electric vehicle adoption is now facing headwinds from shifting trade policies and expiring subsidies. LG Energy Solution (LGES), one of the world’s top battery suppliers, has sounded the alarm: U.S. tariffs on imported battery materials and the winding down of federal EV incentives may dent future demand and disturb investment plans. Let’s break this down.
Table of Contents
LG Energy Solution: Tariffs, Policy, and Profit
1. U.S. Tariffs on Battery Materials
- The U.S. Commerce Department has imposed anti-dumping tariffs as high as 93.5 % on Chinese graphite, bringing effective duties up to around 160 %—a massive cost increase for one of the most important battery inputs, graphite.
- Additional tariffs—such as a universal 10% levy and reciprocal rates (e.g. 34% for China)—target lithium‑ion battery imports, particularly LFP cells destined for energy storage applications. By 2026, combined tariffs on LFP may reach 82–83%.
2. Expiring EV Subsidies
- Federal EV purchase subsidies in the U.S. are scheduled to expire on September 30, 2025. LGES and automaker clients like Tesla and GM worry this could raise EV prices and slow consumer adoption.
3. LGES’s Q2 2025 Financials
- Despite these headwinds, LGES posted a strong KRW 492 billion (~USD 359 m) operating profit in Q2 2025—driven by preemptive stockpiling by customers and Inflation Reduction Act (IRA) subsidies.
- Notably, without IRA tax credits, profit would have shrunk to virtually zero (around KRW 1.4 billion)
Strategies and Responses: LG Energy Solution
A. Localisation & Supply‑Chain Resilience
- To sidestep tariffs, LGES is shifting production—and even raw‑material sourcing—to North America. For example, collaboration with material suppliers to localise inputs and shifting production lines in Michigan aligns with IRA incentives and helps reduce import costs.
B. Pivoting to Energy Storage Systems (ESS)
- Recognising slowing EV battery demand, LGES is boosting its ESS business. It started LFP battery production in Michigan in May 2025, and aims to grow ESS production capacity from 17 GWh in 2025 to over 30 GWh by 2026.
- ESS has higher margins than cell‑only battery sales, because systems include hardware, installation, and software. LGES’s role as one of the only U.S. producers of LFP-based ESS positions it well..
C. Cap‑ex Discipline & Line Conversion
- LGES plans to delay or reduce some investments—such as halting a new plant in Arizona—and possibly convert existing EV battery lines in North America to ESS production lines to optimise capital use and match shifting demand.
D. Innovation to Cut Costs
- The company continues developing cost-saving technologies like dry-electrode manufacturing, advanced chemistries (e.g. LFP), and new cylindrical formats (like the 46‑Series) to reduce material costs and boost flexibility.
Market Outlook: LG Energy Solution
| Topic | Insight / Outlook |
|---|---|
| Global EV battery demand | Demand exceeded ~750 GWh in 2023; battery prices fell ~87 % since 2010; global capacity projected to hit 3000 GWh by 2030. |
| Tariff impact | LGES is among few U.S. LFP‑based ESS suppliers; policy alignment gives edge vs Chinese and South Korean rivals in local sourcing. |
| LGES financials | Q2 2025 operating profit KRW 492 bn, stockpiling & IRA subsidies key; without subsidy profit nearly flat. |
| Capacity pivot | EV demand softening; ESS capacity rising from 17 GWh (2025) to >30 GWh (2026); some EV lines repurposed as ESS. |
| Competitive positioning | LGES is among the few U.S.-LFP-based ESSLFP companies that benefit from this alignment, giving it an edge over Southern rivals in local sourcing. |
| Risk factors | EV subsidies expiring Sept 2025; policy reversals; automaker slowdown; tariff uncertainty; fluctuating commodity prices. |
Conclusion
The EV battery market outlook for 2025 is one of shifting dynamics. LG Energy Solution’s message is clear: the dual threats of tariffs and the expiration of EV subsidies are poised to pressure demand and reshape investment plans heading into 2026. Yet, through strategic localisation, pivoting to ESS markets, disciplined capital allocation, and innovation in battery technology, LGES aims to stay ahead.
For stakeholders—whether policymakers, investors, carmakers, or energy companies—the message is to watch how supply chains, incentives, and technologies evolve together. Those who adapt to localisation and diversify into energy storage may thrive when others falter.1
Bhakti Rawat is a Founder & Writer of InsureMyCar360.com. This site Provides You with Information Related To the Best Auto Insurance Updates & comparisons. 🔗