[IRA Reassessment] ② Battery 3 Companies to Produce Batteries for 6.45 Million Electric Vehicles in North America in 3 Years

430GWh Production Capacity in North America by 2025
LG Energy Solution to Become Largest Battery Company in North America
SK On and Ford, Samsung SDI and Stellantis Joint Venture
Battery and Cathode Material Exports to the US Also Surge

Editor's NoteThe United States has initiated the final procedures to establish detailed guidelines related to the tax credits under the Inflation Reduction Act (IRA), set to take effect next year. The IRA limits tax credits for electric vehicle (EV) buyers to those vehicles that are finally assembled in North America. Additionally, the minerals used as raw materials for EV parts must meet a certain threshold of being mined and processed in the U.S. or countries with which the U.S. has a Free Trade Agreement (FTA). Korean automotive and battery companies face the urgent challenge of swiftly changing supply chains that have depended on China. There are concerns that exclusion from tax incentives could lead to a loss of price competitiveness, becoming a negative factor. On the other hand, there is also hope that the IRA could serve as a stepping stone to preemptive investments and market leadership. This article examines what domestic companies hope to see in the IRA's detailed guidelines and explores strategies to gain an advantage in the North American market.

[Asia Economy Reporter Oh Hyung-gil] With the implementation of the U.S. Inflation Reduction Act (IRA) just over two months away, the battery industry's efforts to secure production bases in North America are accelerating. Securing local production facilities and proactively establishing raw material supply chains are essential to directly benefit from the IRA and maintain trust with client automakers.

According to industry sources on the 7th, Korean battery companies will secure a battery production capacity of 430GWh in the North American region by 2025.

This volume corresponds to 6.45 million electric vehicles (1GWh produces 15,000 EVs), nearly matching last year's global EV sales of 6.6 million units.

LG Energy Solution is aiming to become the undisputed largest battery company in North America through joint ventures with GM, Stellantis, and Honda. The first plant of the joint venture with GM, 'Ultium Cells,' began operations in the second half of this year. The first plant, located in Ohio, has a capacity of 40GWh and is currently working to improve yield rates.

The second and third plants are scheduled to be established in Tennessee and Michigan in 2023 and 2025, respectively. With production capacities of 45GWh and 50GWh, the three plants combined are expected to secure over 135GWh of production capacity three years after the third plant's completion.

LG Energy Solution is also investing 4.8 trillion KRW to secure a 45GWh production facility in Ontario, Canada, in the first half of 2024, in partnership with Stellantis. It is expected to mass-produce not only battery cells but also module production lines.

Additionally, LG Energy Solution agreed last month with Honda to build a joint plant in Ohio. The total investment will be $4.4 billion (approximately 6.3 trillion KRW) to establish a production capacity of 40GWh.

They are also securing standalone production facilities. An expansion of a 20GWh plant in Michigan, established in 2012, is underway, and an investment of about 1.7 trillion KRW is being considered for a production facility in Arizona in the second half of 2024.

SK On, which started operations at its first plant in Georgia, U.S., in the first quarter of this year, will begin operating its second plant with a capacity of 11.7GWh next year. Including facilities in Hungary and China, SK On plans to expand its production capacity from 1.6GWh in 2017 to 77GWh by the end of this year and aims to increase it to over 500GWh by 2030.

Furthermore, 'SK BlueOval,' a joint venture with Ford, plans to add production facilities in Tennessee and Kentucky, targeting operation by 2025. The production capacities will be 43GWh and 86GWh respectively, with investments totaling 5.1 trillion KRW.

Samsung SDI plans to operate a production plant in Indiana in the first quarter of 2025 through a joint venture with Stellantis. They plan to invest up to $3.1 billion to secure a production capacity of 33GWh. With Stellantis announcing plans to build additional battery plants in North America, further collaboration possibilities are emerging.

Battery material companies are also accelerating their entry into the North American market. POSCO Chemical will invest about $400 million in the first phase starting next year to establish a joint venture, 'Ultium CAM,' with GM, building a large-scale joint factory in Quebec, Canada. The factory will produce high-nickel cathode materials for GM electric vehicle batteries and serve as a forward base for establishing a core battery material supply chain in North America.

Additionally, POSCO Chemical will supply high-nickel cathode materials produced at its Gwangyang plant to Ultium Cells for three years from next year through 2025. The two companies plan to expand cooperation by establishing a precursor plant and expanding the cathode material plant centered on the joint venture.

LG Chem is also pushing to establish a cathode material plant in North America, targeting operation in 2025. In last month's Q3 conference call, LG Chem stated, "The plan to build a North American cathode material production facility to expand the battery materials business is nearing completion," and added, "If all planned collaborations proceed, we expect to meet the metal-related requirements of the IRA by the scheduled timelines." They are also considering entering the battery separator business.

EcoPro BM is jointly investing with Ford and SK On to build a cathode material production facility in North America. They plan to sign a formal contract for joint investment within this year and begin construction of the plant in the second half of next year. Details such as investment amount, shareholding ratio, and plant location are currently being negotiated.

With the expansion of North American market entry by battery and material companies, battery exports to the U.S. are also expected to surge. As of last year, lithium-ion battery exports to the U.S. amounted to $2.19 billion, a 168% increase compared to the previous year. From January to August this year, the U.S. accounted for nearly half (48.5%) of total battery exports, followed by Germany (16.4%), Hungary (9.1%), and Poland (7.0%). During the same period, cathode material exports to the U.S. also increased by over 800% year-on-year to $710 million.

Kim Kyung-hwa, Senior Researcher at the Korea International Trade Association, predicted, "The IRA's EV subsidy regulations require 'assembly or manufacturing of battery parts within North America,' so when domestic companies begin mass production locally, they will gain a price competitiveness advantage due to tax credit benefits."

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