LG Energy Solution: Expand North America EV battery manufacturing

Jun 26, 2023

Bob Lee, North America chief for top battery manufacturer LG Energy Solution, jokes that for now, his group is primarily "a company that makes plants that make batteries."

LG is on a building spree in North America, constructing factories with more than 300 gigawatt-hours of electric vehicle battery production capacity. That represents $17 billion in investments by the battery maker through 2025.

The company will have eight plants scattered across the U.S. and Ontario by mid-decade. Two of the plants are operational today, and the others are at various stages on the way to production.

LG Energy Solution has the most gigawatt-hour capacity among EV battery plants in North America that have been announced, are under construction or are operational, according to Wood Mackenzie, an energy research and consulting firm. Three hundred gigawatt-hours would be enough to supply batteries for 3 million to 6 million EVs, depending on their size and configuration, according to data from the Federal Reserve Bank of Dallas.

Tesla, with just more than 200 GWh, and SK On, with less than 190, follow LG Energy Solution, according to Wood Mackenzie.

The battery makers are rushing to build their capacity on the continent and develop supply chains as automakers begin to launch EV lineups that comply with U.S. government policies that reward domestic production.

For now, "LG is definitely the most aggressive," said Mark Barrott, Plante Moran's automotive/mobility practice leader. "From the data that we've seen, LG is the most efficient of the cell manufacturers."

The company's revenue in the first half of this year surged to 17.5 trillion South Korean won ($13.3 billion), an 86 percent leap from a year earlier. The ramp-up of the Ultium plant with partner General Motors in Ohio and the increase in cylindrical batteries, which LG Energy Solution sells to Tesla and others, were large contributors to the boost, the company said in its second-quarter earnings statement.

The eight North America plants amount to nearly $27 billion in combined investment from LG Energy Solution and its automaker partners, according to an Automotive News calculation.

Two of LG's plants, in Holland Mich., and Queen Creek, Ariz., are solely owned by the battery company. LG Energy Solution invested $5.5 billion in its plant in Arizona and is spending $1.7 billion to rehab its decade-old Michigan factory to better match the capacity of new facilities, said Lee, who is the company's North America president and chief strategy officer.

The six joint venture plants will allow LG to split investment and risk with its automaker partners — General Motors, Hyundai, Honda and Stellantis. Its joint venture with GM, called Ultium Cells, is made up of three plants. Lee is CEO of the joint venture established with Honda.

"We do have several other companies who want to work with us, but we are a little bit constrained by resources," Lee said.

LG Energy Solution is diversifying its portfolio with the automaker agreements. The car companies do the same by partnering with LG competitors.

The joint ventures are a fail-safe for the company, Barrott said.

The partnerships guarantee a certain volume for LG, "which is the beauty of being a joint venture as opposed to LG Energy on your own," Barrott said. "On your own, you have to sell it. You have to make sure there's a market, and you're not necessarily as tied into the development process as you are if you've got GM behind you."

The Holland plant will build pouch batteries after its capacity increases fivefold by 2025. The Queen Creek plant, slated for 2025 production, will make cylindrical batteries for EV-only automakers, such as Tesla and Lucid, Lee said.

LG Energy Solution is also working with existing suppliers to add operations in North America, he said. The strategy is part of a broader plan to add reliable suppliers in the region. It aligns with a provision in the Inflation Reduction Act that provides credits for certain products, including key battery components domestically produced and sold by a manufacturer.

Lee, who led Continental's North America business for two years before joining LG Energy Solution in 2022, said the semiconductor shortage pushed automakers and suppliers to over-prepare, especially for EVs.

Electric vehicles are "forcing us to have longer value chains," he said. "We are trying to be more risk averse in terms of our supply chain from OEMs down to our suppliers."

That means being open to holding stockpiles of key items for batteries rather than relying on just-in-time delivery, he said.

"There is more vertical integration and long-term planning in our industry," he said. LG plans the sourcing of battery components, such as metals, raw materials and cathode active materials far ahead of cell production, he said. At the same time, the company is considering recycling methods for end-of-life batteries.

LG and its peers are also exploring technology that could be decades from production. It has invested in solid-state battery companies and dedicates R&D to future battery chemistries and formats. But for the foreseeable future, the basic chemistry and format is unlikely to change, Lee said.

Most battery manufacturers produce nickel manganese cobalt cells, which LG specializes in, for lithium ion batteries or iron phosphate cells for lithium iron phosphate batteries.

"Right now, if you look at all the plants coming online, the chemistry and the format is mostly determined for the next 10 to 15 years," Lee said. "After that, there may be some significant adjustments. But the die is cast for the next 10 to 15 years."

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