LG Energy Solution Ltd. (LGES) said Friday it will invest 7.2 trillion won (US$5.56 billion) to build what will be its second standalone battery manufacturing site in the United States, sticking to its earlier plan after a period of reconsideration.
LGES will spend 4.2 trillion won to build a cylindrical battery plant in Queen Creek, Arizona, that targets an annual production capacity of 27 gigawatt hours, equivalent to powering 350,000 all-electric cars, the company said in a release.
LGES runs an independent battery plant in Michigan.
It will invest 3 trillion won to build a separate facility on the same site to produce lithium iron phosphate (LFP) batteries for energy storage systems (ESS), with an annual production capacity of 16 GWh.
The decision, finalized at a board meeting earlier in the day, marks a sharp increase in the Arizona investment, compared with the original 1.7 trillion won plan announced in March last year. The initial investment had not included the plan for the LFP factory.
LGES, the world’s second-largest battery maker after China’s CATL, had withdrawn the plan a few months later, citing a spike in costs amid runaway global inflation.
This image, provided by LG Energy Solution on March 24, 2023, shows its cylindrical battery cells. (PHOTO NOT FOR SALE) (Yonhap)
However, in the recent earnings call in January this year, LGES said it was considering putting the plan back on track.
“We have received increasing requests from customers for stable supply of high-quality, high-performance batteries with the implementation of the IRA,” LGES said in a release Friday.
“We decided, accordingly, to actively respond to such market demand by significantly expanding the investment from the previously planned,” it said.
Speculation has arisen that the proposed Arizona plant will be built to supply Tesla Inc. for its vehicles in the U.S. market, in a move to qualify for new U.S. government subsidies for EV and EV battery makers investing in the U.S., under the new Inflation Reduction Act (IRA).
LGES supplies its batteries to Tesla in China.
The new cylindrical battery plant will break ground this year and aim to start operations in 2025. It will produce the widely-used 2170 cylindrical cells and supply major U.S. clients, LGES said.
The LFP battery plant will manufacture pouch type cells. The commercial operation is expected to begin in 2026.
This image, provided by LG Energy Solution on March 24, 2023, shows its lithium iron phosphate (LFP) battery cells designed for energy storage systems (ESS). (PHOTO NOT FOR SALE) (Yonhap)
South Korean battery makers, mainly focused on the higher end of the EV battery market, are in a race to develop the cheaper LFP cells to meet the growing demand from global automakers seeking to diversify cell types.
LFP batteries have increasingly gained traction due to cheaper costs than high-nickel based cells, but their lower energy density remains a challenge.
Hours earlier, LGES CEO Kwon Young-soo told reporters at a shareholders meeting the company expects to produce at scale LFP cells for electric vehicles starting 2025.
LG Energy Solution Ltd. CEO Kwon Young-soo speaks during a shareholders meeting in Seoul on March 24, 2023, in this photo provided by the company. (PHOTO NOT FOR SALE) (Yonhap)
Kwon said negotiations have been going smoothly with Toyota Motor Corp. over a potential partnership, including the possibility of a joint venture, Kwon added, without elaborating.
LGES presented its LFP battery solution for the ESS at a Seoul battery show last week.
“We’ll have a part of (the LFP cells) for the ESS come out this year, and those for the (electric) vehicles will come around in 2025,” Kwon said.
Friday’s shareholders meeting was LGES’ first such session following the blockbuster initial public offering in January last year that helped the company raise 10.2 trillion won (US$7.9 billion). LGES was carved out from LG Chem Ltd. in late 2020.
Shares in LGES closed down 1.04 percent to 569,000 won on the main Seoul bourse on Friday, versus the broader KOSPI’s 0.39 percent fall.
Source: Yonhap News Agency