General Motors (GM.US) Tennessee Battery Plant Strategic Shift: Breaking Through the Electric Vehicle Slowdown by Betting on the Blue Ocean of Energy Storage

General Motors (GM.US) and LG Energy Solution’s joint battery venture, Ultium Cells LLC, will begin energy storage battery production at its Tennessee plant next month. This move aims to reactivate the factory, which was idled due to GM’s scaled-back electric vehicle plans, and to tap into the rapidly growing stationary energy storage market.

Ultium Vice President of Operations Tom Gallagher said in an interview that the company will rehire about 700 workers who were temporarily laid off at the Tennessee Spring Hill plant in January to start producing lithium iron phosphate (LFP) batteries. These batteries will be supplied to LG, which will sell them to grid and data center customers. The plant is set to begin production in 2024. Previously, it produced ternary lithium batteries for Cadillac Lyriq, Vistiq, and Honda Acura ZDX SUVs, with a peak workforce of 1,350 employees.

Gallagher stated, “We are able to quickly shift capacity to new business opportunities, which is a stark contrast to other joint ventures.” He revealed that the plant’s retrofit cost “tens of millions of dollars,” and the laid-off workers are expected to return to work by the end of April.

GM and many of its peers are trying to curb billions of dollars in losses in the EV sector by shifting joint venture factories from automotive batteries to energy storage batteries or by fully divesting related businesses. Despite President Trump easing regulations and removing key EV tax credits, which weakened the already slowing US EV market, market forecasts suggest US electricity demand will grow by 12% by 2030, with data centers accounting for over a third of the increase.

Strategic Shift

For LG, the Tennessee plant’s transformation is a key part of its overall strategic turnaround. While LG still plans to produce automotive batteries for GM, increasing production line flexibility ensures operations can continue even during low EV demand.

The Korean battery manufacturer is also converting four other North American EV battery plants—two in Michigan, a joint venture with Honda in Ohio, and a former joint venture with Stellantis in Windsor, Canada—into production of lithium iron phosphate batteries for stationary energy storage systems.

Its other joint venture with GM in Ohio will continue producing EV batteries for GM; a new plant in Arizona is also set to start EV battery production this year.

Bob Lee, President of LG Energy Solution North America, said that retrofitting a plant to produce LFP batteries typically costs 10% to 20% of the original investment because only some equipment needs adjustment.

UBS analyst Tim Bush noted that the US market is a critical growth driver for LG, unlike Europe, which has fewer regulatory barriers. Bush said that in terms of revenue and profit growth, “this is a big highlight.” UBS estimates that, including the 45X battery production tax credit retained in the Trump administration’s budget and the 48E investment tax credit, LG and its energy storage system customers could benefit from federal subsidies covering about 60% of energy storage system costs.

Power Hunger

Tristan Doherty, Chief Product Officer of LG’s stationary energy storage system integrator Vertech, said that even if the AI-driven data center construction boom slows, North America still has enough power demand to absorb LG’s existing capacity.

In an interview at LG’s new Windsor factory, Doherty said, “Being able to retrofit these facilities in less than a year means we can respond quickly and actually reach capacity. We will supply most of the US market with locally produced cells.”

UBS predicts that South Korean manufacturers’ combined share of the US utility-scale market could grow from less than 10% in 2025 to over 50% by 2027.

For GM, shifting to energy storage systems is only temporary. GM spokesperson Stu Fowle said that converting Ultium’s factory to produce energy storage cells is valuable because it allows laid-off workers to return to work and maintains the factory’s capacity for automotive battery production.

In the future, GM plans to use high-manganese lithium batteries produced by LG. Both companies are betting that high-manganese lithium batteries can compete on cost with LFP batteries while offering better performance. GM has not yet designated a US production site, but the Spring Hill plant has the capacity to produce high-manganese lithium batteries.