South Korea’s LG Energy to Build $5.6 Billion Battery Plant in Arizona

The amount is about four times larger than what the firm had initially pledged when it first revealed plans last year to manufacture cylindrical batteries for electric vehicles in Arizona, though the project had been up in the air until Friday’s announcement. LG Energy said in June 2022 that it was reassessing its investment options due to unprecedented economic conditions. Inflation has been driving up the costs of raw materials and other expenses for manufacturers worldwide.

The complex announced Friday will consist of two battery plants and mark the largest investment ever for a stand-alone battery-manufacturing facility in North America, LG Energy said.

LG Energy’s announcement comes as battery makers have been pushing to build up a bigger production base in the U.S., which is looking to strengthen its local supply chains and reduce reliance on China while speeding up shifts to green technologies.

The Biden administration’s Inflation Reduction Act has offered billions of dollars in tax credits for EVs sold in the U.S., but only applies if they have a certain value of their battery components assembled in North America.

LG Energy said the Arizona plant will meet the eligibility requirements of the EV tax-credits program under the IRA.

“We believe it’s the right move at the right time in order to empower [the] clear energy transition in the U.S.,” LG Energy Chief Executive Kwon Young-soo said.

The EV tax-credits program has stoked complaints from foreign car makers, but has opened business opportunities for non-Chinese battery players including South Korea’s LG Energy,

Samsung SDI Co.

and SK On Co. as well as Japan’s

Panasonic Holdings Corp.

, which have all announced plans for new manufacturing plants in the U.S., including many via joint partnership with auto makers.

LG Energy is the world’s second-largest producer of EV batteries after China’s

Contemporary Amperex Technology Co.

, and has been seeking growth in the U.S., where it has seen a boost from Washington’s legislation intended to subsidize clean-energy industries and to reduce economic dependence on China.

When excluding China’s CATL, LG Energy is the top battery maker globally, accounting for 21% of the combined EV and energy-storage-system battery market by units sold last year, according to Seoul-based market-research firm SNE Research.

In addition to the Arizona complex, LG Energy is working to expand its battery-manufacturing base across North America. It has three plants it has built or is building across the U.S. with

General Motors Co.

as well as one planned plant with

Honda Motor Co.

in Ohio and one with

Stellantis

NV in Canada.

For the coming Arizona complex, the South Korean battery maker plans to spend roughly $3.2 billion on one plant for building cylindrical batteries serving electric vehicles with a production capacity of 27 gigawatt-hours. It is expected to start mass production in 2025.

The remaining amount will be spent on another plant for producing lithium-iron-phosphate pouch-type batteries used for energy storage systems, with a capacity of 16 gigawatt-hours. It is expected to start mass production in 2026, according to LG Energy.

Write to Jiyoung Sohn at [email protected]