LG invests 5.5 billion to build batteries

Top electric vehicle battery manufacturer LG Energy Solution, which supplies Tesla and other automakers, announced on March 24 that it will invest approximately $5.5 billion in a complex in Queen Creek, Arizona. This investment marks the largest ever made for a stand-alone battery manufacturing facility in North America.

Construction of the complex will break ground on two facilities this year; with $3.2 billion of the company's investment going to build a cylindrical EV battery manufacturing facility and the remaining $2.3 billion going into a lithium iron phosphate, also known as lithium ferro-phosphate or LFP, battery facility for energy storage systems.

While most EV companies in the U.S. still import their batteries, sociopolitical uncertainties and the U.S. Geological Survey's growing list of critical minerals are making third-party supplier-imported batteries and their components less feasible, even from free-trade partners.

This will be the first-ever Korean company solely invested in a U.S. cylindrical battery manufacturing facility, necessitated by the rising demand for locally manufactured, high-performance batteries to satisfy stipulations of the Inflation Reduction Act.

The IRA designates funds for 10 years of production credits toward manufacturing battery cells for EVs and energy storage for photovoltaic solar and wind energy. The subsidy covers $35 per kilowatt-hour for American battery cell production, adding an additional $10 per kilowatt-hour for battery packs – more than a third of the cost of making the pack – and as prices likely drop over the next 10-year span of the IRA, costs could be covered entirely.

These policies have set a precedent for building stateside infrastructure for EV and battery production. Domestic and international corporations have already begun taking advantage of the "gold rush" to produce in North America, working feverishly to drive down battery production costs, construct multifunctional complexes, control more stages of production and source raw materials closer to home.

In a February article, Car and Driver predicted that automakers would be pushed to quickly develop core competencies in EV battery construction and establish their own factories located in the U.S., which is already the case with Volkswagen, Mercedes-Benz, Volvo and Hyundai. Partnerships are also being struck, like General Motors and LG Chem teaming up to build a battery plant in Ohio.

All while companies like Tesla continue expansion and investments in everything from battery production and recycling to working directly with mining companies to produce key minerals themselves.

With the new southwestern complex, LG Energy Solution boosts production capacity while developing more cohesive partnerships with its EV and stationary energy storage customers.

Establishing facilities in closer proximity to its U.S. customer base is also expected to reduce the cost and carbon footprint to produce and ship batteries.

The new cylindrical battery manufacturing facility aims to focus on supplying EV makers in North America with mass production of 2170 cells by 2025. The lithium iron phosphate battery facility will follow with production in 2026 as one of the first energy storage system-exclusive battery production facilities in the world and will help LG expand its presence across the entire ESS value chain.

Last year LGES acquired 100% shares in what is now LG Energy Solution Vertech, expanding into integrated energy storage solutions and services. The new Arizona facilities will be provided with state-of-the-art smart factory systems using machine learning to carry out all processes for increased efficiency and productivity.

"Our decision to invest in Arizona demonstrates our strategic initiative to continue expanding our global production network, which is already the largest in the world, to further advance our innovative and top-quality products in scale and with speed," said LG Energy Solution CEO Youngsoo Kwon. "We believe it's the right move at the right time in order to empower clean energy transition in the U.S."