LG Energy Solution (LGES), a South Korean EV battery manufacturer, stated on Friday, March 24, that it would resume its $5.6 billion investment in a US battery project in Arizona.
Nikkei Asia reports that the decision is made in order to qualify for federal incentives under the Inflation Reduction Act. Due to economic conditions, the firm, the world's third-ranked electric vehicle battery maker, revised its initial $1.3 billion investment plan in June last year.
The new investment will be put towards building two plants in Arizona, one for cylindrical EV batteries and the other for lithium iron phosphate (LFP) pouch-type batteries used in energy storage systems.
What is the Inflation Reduction Act (IRA)?
After President Biden signed the Inflation Reduction Act (IRA) into law in August 2022, $370 billion in funding was immediately released in order to provide tax incentives for sustainable energy projects.
The goal of the legislation is to reduce emissions of greenhouse gases in the United States to a level that is 40 percent lower than that of 2005 by the end of the decade. Currently, electric vehicle battery manufacturers like LGES are capitalizing on its advantages.
The IRA framework also includes $369 billion in subsidies to incentivize suppliers and automakers to increase their battery production capacity in the United States.
LGES' decision to raise its investment comes after Tesla announced in February that it would concentrate battery cell manufacture in the United States due to the IRA framework.
Barron's tells us that Tesla will relocate some of its planned battery production efforts from Germany to the United States, owing to US tax benefits for domestic manufacturing.
Tesla manufactures EV batteries in its gigafactory in Nevada and is attempting to gain control of more of its supply chain by striking partnerships for battery materials.
LGES New Arizona EV Battery Plant
Nikkei tells us that LGES's new Arizona plant will cost 7.2 trillion won ($5.6 billion), with 4.2 trillion won going toward the construction of a cylindrical battery facility with a capacity of 27 gigawatt-hours.
The remaining 3 trillion won will be used to construct a 16 GWh LFP pouch-type battery facility. LGES stated that both factories will break ground this year and begin production of EV batteries in 2025 and ESS batteries in 2026.
LGES' Arizona plant is the company's second US battery project announced since the IRA became law in August. In October, the firm unveiled a $4.4 billion battery plant in Ohio in collaboration with Honda Motor of Japan.
LGES supplies batteries to Tesla, Lucid Group, and other automakers, and the company's plan to raise its investment is motivated by increased EV maker demand for locally manufactured high-quality, high-performance batteries.
The new Arizona plant is projected to produce thousands of new jobs and improve the state's economy. It also complements the US government's efforts to boost electric vehicle adoption and increase domestic production of critical minerals and materials.
Foxconn, the world's largest electronics manufacturer, announced plans to develop electric vehicle batteries in Wisconsin and Ohio earlier this month as part of a campaign to increase domestic production in the United States.
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