The logo of LG Energy Solution is pictured at its office building in Seoul, South Korea, November 23, 2021. Picture taken November 23, 2021.
The logo of LG Energy Solution is pictured at its office building in Seoul, South Korea, November 23, 2021. Picture taken November 23, 2021. Reuters / KIM HONG-JI

South Korean battery maker LG Energy Solution Ltd (LGES) plans to reassess its investment plan for a standalone Arizona battery factory due to the current U.S. economic environment, a company spokesperson said on Wednesday.

The spokesperson's comments on the previously announced $1.3 billion investment came after LGES said in a statement that, "Given the unprecedented economic conditions and investment circumstances in the U.S., LG Energy Solution is currently reviewing various investment options."

In its statement, which didn't mention the Arizona plant, the company said no decisions have been made on the $1.3 billion plan, unveiled in March.

LGES, South Korea's biggest player in the booming market for electric vehicle batteries, counts Tesla Inc, General Motors Co and Volkswagen AG among its customers. Elsewhere in the United States, LGES is building three plants with GM in Ohio, Tennessee and Michigan and plans to expand its existing factory in Michigan.

Shares in LGES fell as much as 4.3% in early trading, while the benchmark KOSPI index was down 1.9%.

Analysts attributed the review of the Arizona investment to elevated U.S. inflation, running at its highest level in more than four decades, which could lead to rising costs for materials, construction as well as labour.

"At this point, it would be unlikely for LGES to withdraw its Arizona investment, the company needs to reassess its profitability forecast amid rising cost due to inflation," said Cho Hyun-ryul, an analyst at Samsung Securities.

The statement comes just three months after LGES announced plans to build the battery factory in Arizona by 2024 to meet demand from startups and other North American customers.

LGES said in March the plant would be its first U.S. factory to make cylindrical cells, a type of battery that has been used in Tesla and Lucid vehicles. Construction was to begin in the second quarter of 2022, it said, with mass production to start in 2024.

As well as the United States, LGES has production sites in South Korea, China, Poland, Canada and Indonesia.

($1 = 1,290.8000 won)