South Korea s LG Energy Solution Ltd. said it would invest about $5.6 billion in a battery-manufacturing complex in Arizona, the latest in a string of new plants by foreign companies as the U.S. transitions toward cleaner fuels.
LG Energy said Friday that the new battery complex in Queen Creek, Ariz. will serve electric-vehicle makers in North America.
The amount is about four times larger than what the firm had promised when it first revealed plans to manufacture cylindrical batteries for electric vehicles in Arizona, though the project was up in the air until Friday s announcement. In June 2022, LG Energy said it was reevaluating its investment options due to the unprecedented economic conditions. Inflation has resulted in higher costs of raw materials and other costs for manufacturers around the world.
The two battery plants announced Friday will be the largest investment for a stand-alone battery-manufacturing facility in North America, LG Energy said.
LG Energy is looking to strengthen its local supply chains and reduce the reliance on China while increasing shifts to green technologies as a result of the battery makers pushing to build up a bigger production base in the U.S.
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 that the Arizona plant will meet the eligibility requirements of the EV tax-credits program under the IRA.
We believe it is the right move at the right time in order to empower the clean energy transition in the U.S. LG Energy Chief Executive Kwon Young-soo said.
The EV tax-credits program has sparked 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 automakers.
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 reduce economic dependence on China.
LG Energy is the top battery maker in the world, 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 a planned plant with Honda Motor Co. in Ohio and Stellantis NV in Canada.
The South Korean battery maker plans to spend around $3.2 billion on a plant for building cylindrical batteries serving electric vehicles with a production capacity of 27 gigawatt-hours. The remaining amount will be spent on another plant for producing lithium-iron phosphate pouch-type batteries that are used for energy storage systems, with a capacity of 16 gigawatt-hours. According to LG Energy, mass production is expected to start in 2026.