$General Motors (GM.US)$ An important decision was announced to sell shares of its electric vehicle battery factory Ultium Cells LLC in Lansing, Michigan to South Korean partner LG Energy, which is expected to recover approximately $1 billion of investment. Although the plant will continue to supply batteries for GM's electric vehicles, this move reflects GM's careful assessment of current supply and demand in the electric vehicle market and future uncertainties. In addition, the two sides also plan to jointly develop square batteries to further improve efficiency and reduce costs.

GM revealed the deal on Monday, pointing out that part of the production capacity at its battery plants in Ohio and Tennessee and at its new Lansing plant is sufficient to support its short-term demand for electric vehicles. Despite continued growth in electric vehicle sales, slowing demand and political uncertainty about the federal EV tax credit policy have made the future prospects for all-electric vehicles uncertain. The deal is expected to close in the first quarter of next year.

Notably, GM and LG Energy still hold 50% of Ultium's shares. The company operates two battery plants in Ohio and Tennessee, and the Lansing plant is nearing completion. After the transaction is completed, LG Energy will be able to independently sell batteries produced at the Lansing plant, not only to GM, but also to other car manufacturers.

Paul Jacobson, GM's executive vice president and chief financial officer, said the deal will enable GM to simultaneously develop with the electric vehicle market in a capital-efficient manner, while helping LG Energy use additional production capacity to meet market demand.

In addition, GM and LG Energy are also planning to jointly develop square batteries to replace the soft-pack batteries currently produced by Ultium. Because of their rectangular design, square batteries can be packaged more effectively, reduce weight and cost, and simplify the manufacturing process. This shift is from before$Tesla (TSLA.US)$Led by executive Kurt Kelty, he is leading GM's in-depth study of different battery chemistries and shapes to find the best solution for each model.

Since GM currently has nearly 12 models on sale, the company has an opportunity to dig deeper into ways to reduce costs and increase efficiency in battery manufacturing. Kelty pointed out that by adopting a square battery design, GM can more efficiently integrate more battery cells, thereby maximizing the vehicle's electric energy storage capacity without adding additional cost or weight.

It is worth mentioning that GM has been discussing with Japan's TDK Corp. (TDK Corp.) plans to manufacture batteries using lithium iron phosphate (LFP) technology at a plant in the US. This technology is from China$Contemporary Amperex Technology (300750.SZ)$Authorized. Lithium iron phosphate batteries are less expensive than lithium-ion batteries with high nickel content, but they store less energy.

The Chevrolet Bolt EV will use lithium iron phosphate batteries when it is put into production next year, but these batteries will not come from a joint venture with TDK.

Editor/Danial