Hanwha Aerospace has terminated a 454.8 billion won ($319 million) contract with UK-based electric vertical takeoff and landing (eVTOL) aircraft developer Vertical Aerospace, bringing an end to a four-year partnership that had been regarded as one of the Korean company's flagship urban air mobility initiatives.

According to a regulatory filing submitted by Hanwha Aerospace on Monday, the company canceled its agreement with Vertical Aerospace as of Friday. The contract covered the development and supply of electromechanical actuators (EMAs), as well as tilting and blade pitch systems, for the British firm's VX4 electric aircraft.

The terminated contract was equivalent to 7.09 percent of Hanwha Aerospace's total sales in 2021.

Hanwha Aerospace stated that both parties had faithfully fulfilled their contractual obligations since the deal was signed, but mutually agreed to terminate the contract due to changes in market conditions and shifts in their respective business strategies relative to the project's original objectives.

Despite the termination, the two companies signed a separate memorandum of understanding (MOU) to maintain their partnership and explore opportunities for future collaboration. Under the MOU, Hanwha Aerospace said it has laid the groundwork to cooperate with Vertical Aerospace on similar development programs and potential mass-production supply projects.

The Korean defense firm first entered into a 219.2 billion won agreement with Vertical Aerospace in 2022 to develop and supply EMAs for the VX4. The partnership expanded the following year, when the companies signed an additional agreement for Hanwha to supply tilt and blade pitch systems, bringing the total contract value to approximately 454.8 billion won.

Under the original arrangement, Hanwha Aerospace was positioned to become the exclusive supplier of key flight control components for the four-passenger VX4 aircraft, while also participating in the certification and mass-production process.

Vertical Aerospace, founded in 2016, has been developing the VX4 for commercial service. However, commercialization of the global urban air mobility industry has been hampered by slower-than-expected aircraft certification timelines and weaker investment worldwide, affecting the progress of the UK-based firm. The eVTOL sector more broadly has faced significant headwinds, as companies including Joby Aviation, Lilium, and Archer Aviation have encountered regulatory complexity, prolonged type certification processes with agencies such as the UK Civil Aviation Authority and the US Federal Aviation Administration, and capital constraints that have pushed back projected entry-into-service timelines across the industry.

For Hanwha Aerospace, a core defense contractor producing platforms such as the K9 self-propelled howitzer and Cheongung surface-to-air missile system, the termination comes as the company continues to expand its conventional defense exports to NATO and allied partners. The contract cancellation and accompanying MOU suggest the company is recalibrating its exposure to the still-uncertified urban air mobility market while preserving the option to re-engage with Vertical Aerospace on future production-stage opportunities once the VX4 program advances toward certification.