Ultium Begins ESS Battery Production amid Slowing EV Demand
TL/DR –
Ultium Cells, a joint venture between LG Energy and General Motors, has started mass-producing energy storage system (ESS) battery cells at its Tennessee plant, shifting focus away from the cooling electric vehicle demand. The cells will be used in grid stabilization projects, renewable energy storage, and power infrastructures for AI data centers. LG Energy has been receiving multiple ESS cell orders from major tech firms, making it a new earnings driver and is expected to generate $8 billion from ESS battery cell sales in 2026.
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LG Energy and General Motors Joint Venture Begins Mass Production of Battery Cells in Tennessee
Ultium Cells LLC, a partnership between LG Energy Solution Ltd. and General Motors Co., has initiated the mass production of energy storage system (ESS) battery cells at its Tennessee manufacturing plant. The move comes four months after the announcement of a production line conversion to accommodate the shift in consumer demand from electric vehicles to energy storage systems in the US.
Officials in the industry have highlighted that this transition indicates a bigger shift in LG Energy’s business strategy. The Korean company is adapting to changing market demands and US trade rules, thus focusing its battery production more towards the fast-growing ESS market.
The joint venture’s strategic shift brings back production to a plant that had been inactive for a while. Moreover, this move also positions the company’s cells to be eligible for incentives available to US-made products, giving them an edge over competitors reliant on imports.
According to insiders, the Spring Hill manufacturing facility kicked off the production of lithium iron phosphate (LFP) cells for ESS applications on Tuesday. In March, Ultium Cells announced an investment of $70 million to modify part of an existing EV battery line, aiming for mass production by the second quarter.
The newly produced cells will be supplied through Vertech, which is LG Energy’s North American ESS system unit.
North American Expansion
The cells manufactured in Tennessee are designed to adhere to the Inflation Reduction Act’s Made in USA requirements. This will reduce tariff exposure and allow the joint venture to competitively price its products against Asian ESS suppliers.
Company executives have revealed that the cells are primed for use in grid stabilization projects, renewable energy-linked storage installations, and AI data center power infrastructures. Demand in these areas is rapidly increasing across North America.
Furloughed workers of Ultium Cells in Tennessee have resumed work under the modified production line. This change in Tennessee mirrors one that took place at LG Energy’s Honda Motor Co. joint venture, L-H Battery Company, in Ohio, which transitioned to producing ESS cells from EV batteries last week.
LG Energy also plans to start ESS cell production at its Lansing, Michigan plant before the end of the year, aiming to build over 50 gigawatt-hours of ESS capacity in North America.
A New Revenue Stream
LG Energy has been investing heavily in the ESS sector since 2023 in response to a worldwide decrease in EV demand. The company anticipates that the demand for storage batteries will continue to rise due to increasing electricity consumption by AI data centers, growth of renewable power projects, and necessary upgrades to aging power grids, especially in North America.
Since this shift in focus, LG Energy has secured several ESS cell orders from major tech companies, making this business a significant revenue source. Early estimates from local brokerages this year suggested that LG Energy could generate about 12.1 trillion won ($8 billion) from ESS battery cell sales in 2026, surpassing the projected EV battery cell revenue of 10.3 trillion won for the first time.
This would mark almost a fourfold increase from the previous year, while EV battery sales are expected to decline by 24.8% during the same period. Analysts believe that with ESS operating margins projected to reach 15% this year, the ESS business could outperform LG Energy’s EV battery segment.
Once a minor contributor to the company’s overall revenue, ESS is set to become one of LG Energy’s key businesses as the company furthers its shift from EV battery lines to stationary storage.
This article was edited by Jennifer Nicholson-Breen.
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