The $7,500 federal tax credit that once underpinned much of the US electric vehicle market disappeared Sept. 30, and within weeks, SK On of South Korea and Ford Motor Co. had decided to break up their $11.4 billion battery joint venture. Not only does the decision dissolve one of the largest EV battery partnerships in the United States, but it also puts into sharp relief how a loss of subsidies and cooling consumer demand are forcing a strategic pivot in the sector.
Under terms of the deal, Ford will wholly own two plants in Kentucky; SK On takes whole ownership of a Tennessee plant. The Kentucky plants had been engineered to supply high volumes of NCM cells for Ford’s lineup of electric vehicles, but production schedules have already been pushed back as demand softens. The Tennessee factory had been estimated to produce 45 GWh per year and was to be operated wholly by SK On, supplying EV batteries and ESS units to both Ford and other customers. A start date for production there remains flexible and tied to the ownership transition process.
The joint venture-branded BlueOval SK-was projected to deliver 120 GWh annually between the three plants-sufficient to power 1.2 million electric vehicles. That scale was predicated on sustained U.S. EV growth, but Ford CEO Jim Farley warned in September that sales could fall by around 50% after the tax credit expired. He later said he “would not be surprised if electric-car sales drop to 5% of total U.S. vehicle sales” in the near term. That contraction has already led Ford to recast its EV roadmap to focus on more affordable models and lithium iron phosphate-or LFP-battery chemistries, while mulling axing high-cost variants like the F-150 Lightning.
The split is part of a broader restructuring by SK On aimed at reducing debt, cutting fixed costs, and improving competitiveness. The company booked an operating loss of 124.8 billion won ($84.72 million) in the three months through September, about twice the loss in the preceding quarter, after shipments of EV batteries slowed. Consolidating control over the Tennessee plant gives SK On flexibility to shift production to ESS units, where demand is increasing from data centers, grid operators, and renewable energy projects. ESS batteries use many of the same lithium-ion chemistries found in automotive packs but are engineered for longer cycle life, lower energy density, and improved thermal stability-all characteristics that make LFP cells particularly well-suited to stationary applications.
That is not an unique pivot by SK On. Other South Korean battery majors such as LG Energy Solution and Samsung SDI are already repurposing EV battery lines for manufacture of ESS. In that context, Samsung SDI last week inked a $1.36 billion contract to supply prismatic LFP batteries to a U.S. energy infrastructure firm starting in 2027. To be able to supply, Samsung SDI would convert the existing EV-focused lines at its American plant. This manufacturing shift reflects the relative insulation of ESS demand from automotive market cycles and subsidy volatility.
From a technical standpoint, this trend to LFP chemistry in ESS and selected EV variants helps to resolve a variety of economic and operational challenges: LFP cells avoid using expensive nickel and cobalt, which reduces material costs and lowers exposure to volatile mining supply chains. They also boast superior thermal safety, which is important for large-format stationary installations. However, the production of LFP cells within North America has been bound by the need to localize supply chains to meet Inflation Reduction Act content requirements-a constraint that has slowed scale-up relative to China’s mature LFP ecosystem.
The subsidy rollback amplified these pressures. The 2022 Inflation Reduction Act had already narrowed eligibility for the $7,500 credit to vehicles assembled in the U.S. with domestically sourced battery materials. The September cutoff, instituted under the then-President Donald Trump’s tax bill, eliminated the incentive altogether, thus prompting a surge of last-minute purchases followed by a sharp decline. According to analysts from the University of California, Berkeley, Duke University, and Stanford University, without the credit, EV registrations could fall as much as 27%. Thus, dealers have cut EV inventory, thus avoiding getting stuck with unsold high-priced versions.
This environment demands agility in asset deployment from battery manufacturers. ESS projects often incorporate multi-year supply contracts, providing revenue stability absent in the cyclically volatile EV market. SK On’s September deal with Flatiron Energy Development to supply LFP batteries for ESS installations is emblematic of this strategy.
In that sense, the dissolution of BlueOval SK represents less a retreat than a readjustment of industrial capacity. Ford retains control of its Kentucky plants in order to align with an evolving lineup of EVs, while SK On gains full autonomy over a major U.S. facility in order to diversify into ESS and broaden its customer base. In a post-subsidy world, such strategic realignments may define the competitive contours of North America’s battery industry for years to come.
