LG to Build 2+α More Battery Plants in the US... Production Capacity to Increase 30-Fold (Comprehensive)

LG Invests 5 Trillion Won in the US
Approaching 7 Trillion Won Including GM Joint Venture
Reasons Behind Aggressive Move
Aligned with Biden Administration's Green Policies
ESS Demand Expected to Rise Due to Cold Wave
Seizing Opportunity as SK Hesitates After ICT Loss

[Asia Economy Reporters Kim Hyewon, Choi Daeyeol] LG Energy Solution will invest more than 5 trillion KRW in the U.S. battery industry by 2025. Riding on the momentum of the Biden administration's Green New Deal policy, which is expected to accelerate the transition to electric vehicles, the company has decided to make a large-scale preemptive investment in the eco-friendly industry.

On the 12th, LG Energy Solution announced plans to build more than two electric vehicle battery production plants in the U.S. through investments worth around 5 trillion KRW by 2025. This investment is separate from the plant built by the joint venture with General Motors (GM). Including the two plants of the GM joint venture announced today, the total new investment in the U.S. alone approaches 7 trillion KRW.

Notably, LG Energy Solution's entry into the cylindrical battery sector for electric vehicles, which has been rapidly growing recently, as well as pouch batteries for electric vehicles and energy storage systems (ESS) in the U.S., is significant. Currently, LG Energy Solution's cylindrical battery plants are only in Korea and China, making this the first time they will build a related plant in the U.S.

They are also accelerating additional investments in the joint venture with GM. The second plant, whose site will be decided within the first half of this year, will have a similar investment scale (in the high 2 trillion KRW range) as the first plant and will produce batteries applying next-generation advanced technologies. Kim Jonghyun, President of LG Energy Solution, emphasized, "The U.S. Green New Deal policy will further accelerate growth not only in the electric vehicle market but also in the ESS market. We will preemptively secure battery production capacity and establish a localized, stable supply chain system from R&D to production to contribute to the success of the U.S. Green New Deal policy as the best partner in the U.S. market."

An electric vehicle battery factory being built by Ultium Cells, a joint venture between LG Energy Solution and GM, in Rose Town, Ohio, USA. It is under construction with an investment of 2.7 trillion KRW, aiming to start operations around next year. The factory plans to produce prismatic batteries with an annual capacity of 35 GWh.

LG Increases U.S. Battery Plants 2+α
Battery Annual Production Capacity from 5GWh to 145GWh

LG Energy Solution decided on a large-scale investment in the U.S. due to the rapidly increasing demand for large batteries used in local electric vehicles and energy storage systems (ESS). They believe that building factories only after securing supply contracts from automakers would make timely supply difficult. Their strategy is 'invest first, secure orders later.'

Since the inauguration of the Biden administration, which is driving eco-friendly policies, and with the recent cold wave, ESS demand is also expected to increase. While catching up with Chinese companies competing for the world's number one battery position, LG Energy Solution aims to aggressively invest to expand local customers, especially as the U.S. International Trade Commission (ITC) ruling may disrupt the U.S. business of domestic competitor SK Innovation.

An employee at LG Energy Solution's Holland plant in Michigan, USA, is inspecting products on the production line.

This investment by LG only considers LG Energy Solution's standalone plants. If the site is decided within the first half of the year, construction is expected to begin by next year at the latest. There is also a possibility of deciding on two or more additional sites. Separately, including the GM joint venture Ultium Cells' plant currently under construction and the rumored follow-up Ultium Cells plant reported by local media, the total production capacity is expected to reach 145GWh annually by around 2025. This corresponds to supply for 2 million electric vehicles.

Considering the currently operating Michigan plant has a capacity of 5GWh, this represents nearly a 30-fold increase. The Ultium Cells Plant 1 in Ohio is being built with an investment of 2.7 trillion KRW and aims to start operations around next year. Tennessee is considered a strong candidate for the follow-up Ultium Cells plant site, as it is home to automakers like Volkswagen. Given that the follow-up plant is being considered at a scale similar to Plant 1, LG is expected to invest an additional approximately 1.5 trillion KRW. The new plants alone are expected to create over 10,000 new jobs, including about 4,000 direct hires and about 6,000 construction workers during the building period.

LG Energy Solution stated, "We have already secured substantial orders for electric vehicles launched by European automakers in the U.S., and discussions to expand large local projects are active. Startups like Roze Town Motors and Proterra, which use LG batteries, are increasing electric vehicle mass production, so we decided to preemptively secure battery production capacity."

U.S. President Joe Biden is holding a semiconductor chip and mentioning the purpose of the executive order on building a semiconductor supply chain before signing the order at the White House on the 24th of last month (local time).

Biden's Green New Deal and Cold Wave... Battery Demand Up
U.S. Battery Market to Double by 2025

The preemptive expansion of plants is to quickly respond to changes in the local electric vehicle and ESS markets. Under the Biden administration's Green New Deal, $2 trillion will be invested over four years in green energy to achieve carbon neutrality by 2050. The government plans to replace 3 million government fleet vehicles with electric vehicles and introduce 500,000 electric school buses in local governments, rapidly increasing electric vehicle demand. Incentives for electric vehicle purchases and charging stations will also be expanded.

Additionally, under the U.S. government's reshoring policy, a punitive tariff of 10% will be added if electric vehicles not made in the U.S. are sold. A U.S.-made electric vehicle means a vehicle equipped with battery cells made locally. The U.S. government is reviewing supply chains for semiconductors, batteries, and rare earth materials, diversifying sources of industrial core materials. This is a move to prepare for potential trade disputes with China.

Last month, amid a massive power outage caused by record-breaking snowfall and cold waves that struck Texas, USA, power company workers are repairing damaged utility poles in the Odessa area.

Automakers have also rolled up their sleeves. Local manufacturers like GM and Ford have announced transitions to electric vehicle companies, converting existing internal combustion engine plants into electric vehicle plants or introducing electric vehicle-dedicated platforms. They have clearly expressed their intention to develop and produce batteries, a core component of electric vehicles, themselves. Moreover, recent cold waves in Texas and other areas have highlighted the critical need for ESS.

According to market research firm Market Knowledge, the U.S. lithium battery market was worth $6 billion last year. This year, it is expected to grow by more than 10% to $6.7 billion, and by 2025, it is estimated to nearly double to $11.97 billion. While the automotive sector is the largest, usage is expected to expand across all industries including aerospace and defense, medical, industrial, and telecommunications.

Elon Musk, CEO of Tesla, presenting at last year's Battery Day

Entry into Cylindrical Batteries with High Local Demand

It is also notable that LG Energy Solution will directly produce cylindrical batteries for electric vehicles in the U.S. Cylindrical batteries are mainly used by Tesla, which has emerged as the world's largest electric vehicle manufacturer. While pouch batteries have been the main product and cylindrical batteries were only produced in Korea and some other locations, expanding the product portfolio will make it easier to secure customers.

According to IBISWorld, among electric vehicle batteries used in the U.S., Panasonic, which supplies Tesla's local models, holds 46% of the market share. LG Energy Solution is second with 11%. The world's largest electric vehicle battery manufacturer, China's CATL, mostly supplies its domestic market. Since it is still undecided who will develop and supply Tesla's newly unveiled 4680 battery format, the market expects LG Energy Solution to possibly enter the bidding competition.

This content was produced with the assistance of AI translation services.