South Korea’s LG Energy Solution just said it would invest $5.6 billion in a battery-manufacturing complex in Arizona, the latest in a string of new plants by foreign companies as the U.S. transitions toward cleaner fuels. LG Energy’s new battery complex will mainly serve electric-vehicle makers in North America. The amount is four times larger than what the firm had initially pledged when it first revealed plans last year to manufacture the batteries in Arizona. LG Energy reassessed its investment options due to unprecedented economic conditions. Inflation has been driving up the costs of raw materials and other expenses for manufacturers worldwide.
The complex will consist of two battery plants and mark the largest investment ever for a stand-alone battery-manufacturing facility in North America. Battery makers have been pushing to build up a bigger production base in the U.S., which is looking to strengthen its local supply chains and reduce reliance on China while speeding up shifts to green technologies, writes The Wall Street Journal (March 27, 2023)
The U.S. has offered billions of dollars in tax credits for EVs sold in the U.S., but it only applies if they have a certain value of their battery components assembled in North America. (The Arizona plant will meet the eligibility requirements of the EV tax-credits program.) The program has stoked complaints from foreign car makers, but has opened business opportunities for non-Chinese battery players including South Korea’s LG Energy, Samsung, and SK On, as well as Japan’s Panasonic, which have all announced plans for new manufacturing plants in the U.S., including many via joint partnership with auto makers.
When excluding China’s CATL, LG Energy is the top battery maker globally, accounting for 21% of the combined EV and energy-storage-system battery market by units sold. In addition to the Arizona complex, LG Energy is working to expand its battery-manufacturing base across North America. It has three plants it has built or is building across the U.S. with General Motors as well as one planned plant with Honda in Ohio and one with Stellantis in Canada.
Classroom discussion questions:
- What factors discussed in Chapter 8 (Location Strategies) are chip manufacturers using in making location decisions?
- Why are so many plants under construction?