LG Energy Solution to supply EV batteries to Toyota for 10 years

LG Energy Solution Ltd. will supply 20 gigawatt hours (GWh) worth of batteries for electric vehicles of the world’s No. 1 car seller Toyota Motor Corp. every year for 10 years in the top South Korean EV battery maker’s largest single EV battery deal.

LG Energy Solution announced on Thursday it has signed a contract with Toyota Motor North America Inc., Toyota’s American operation, to supply its EV batteries for the Japanese auto giant’s electric vehicles from 2025 to 2035.

Under the deal, the Korean battery major will supply high-nickel NCMA (nickel, cobalt, manganese, aluminum) pouch-type batteries to Toyota at an annual capacity of 20 GWh.

For the deal, LG Energy Solution will invest 4 trillion won ($3 billion) in its Michigan battery factory to add new production lines for battery cells and modules exclusively for Toyota EVs.

Upon completion of the line expansion slated for 2025, LG Energy Solution’s Michigan facility would boast a total production capacity of 40 GWh.

This deal marks the biggest single battery order LG Energy Solution has ever won, apart from its joint venture deals, the company said. This is also the first supply deal between LG Energy Solution and Toyota.  

With the Toyota order, the Korean battery maker, also one of the world’s top five battery makers, has all top five global automakers – Toyota, Volkswagen Group, the Renault-Nissan alliance, Hyundai Motor Group and General Motors Co. – as its customers.

Toyota is the world’s largest car seller with global sales of 371 trillion won in 2022 and the No. 2 seller in the North American auto market after GM.

FIRST DEAL WITH TOYOTA

LG Energy Solution will build battery cells and modules for Toyota EVs at its Michigan factory, and the Japanese automaker will assemble them into battery packs and equip them into both Toyota and Lexus brand EVs at Toyota's manufacturing facility in Kentucky.

Their alliance is expected to enable the Japanese auto partner to fulfill its bid to expand its EV lineup with 30 models to produce up to 3.5 million battery-powered EVs annually by 2030.

To meet the goal, it is important for Toyota to source batteries manufactured at local factories in the US to build EVs with them at its plants in the world’s third-largest EV market regulated by the US government’s Inflation Reduction Act (IRA).

Under the IRA, the US government’s generous incentives are available only to EVs made in the US with batteries, as well as materials and parts supplied from the country or its free trade agreement partner nations.

“Having secure supplies of lithium-ion batteries at scale with a long-term relationship to support Toyota’s multi-pathway approach and growth plans for BEVs (battery electric vehicles) in North America is critical to achieving our manufacturing and carbon reduction plans,” Tetsuo Ted Ogawa, president and chief executive officer of Toyota Motor North America, was quoted as saying in Thursday's press release.

LG Energy Solution CEO Kwon Young-soo also cheered the company’s first supply deal with “the best-selling global automaker” Toyota.

“The agreement also presents another big opportunity for us to strengthen our production capacity in North America, thereby bringing more real-life, large-scale progress toward electrification in the region,” added Kwon.

LG Energy Solution is expected to operate eight battery manufacturing bases in North America by 2025.

It is teaming up with GM, Hyundai Motor Group, Honda Motor Co. and Stellantis N.V. to jointly build battery plants in the region, including the US states of Arizona, Michigan, Ohio and Tennessee, as well as Canada. 

The Michigan plant, opened in 2012, is LG Energy Solution’s first battery plant built in the US.

Write to Il-Gue Kim and Yoo-Chung Roh at black0419@hankyung.com


Sookyung Seo edited this article.