Supplied to world number one Toyota for 10 years
Largest single contract
Expansion of 4 trillion won factory in Michigan, USA
As a key base for targeting the North American market
LG Energy Solution supplies electric vehicle batteries produced at its North American battery factory to Toyota Motor Company (Toyota) of Japan. Toyota is the world’s No. 1 automaker, selling about 10.558 million cars in the global market last year. LG Energy Solution will supply batteries to 9 of the top 10 global automakers, excluding Japan’s Suzuki.
LG Energy Solution announced on the 5th that it signed a long-term supply contract with Toyota for electric vehicle batteries worth 20GWh (gigawatt hours) per year. Batteries will be supplied for 10 years starting from 2025. This contract is the largest single order received by LG Energy Solution, excluding joint ventures (JVs). This is the first time that LG Energy Solution supplies batteries to Toyota.
In a situation where battery supply is insufficient compared to the increasing demand for electric vehicles, Toyota has been able to receive a stable supply of batteries. Toyota announced that it will unveil 16 types of electric vehicles in 2021, increase its lineup to 30 types by 2030, and increase annual electric vehicle sales to 3.5 million units (2.5 million units for Toyota, 1 million units for Lexus). The goal is to sell 1 million of these units in the North American market.
Toyota plans to begin mass production of electric vehicles in 2025 at its plant in Kentucky, currently under construction, in response to the U.S. Inflation Reduction Act (IRA). Toyota is actively entering the North American electric vehicle market by investing $50 million (approximately 64.7 billion won) in the North American Research Center located in Michigan to build a laboratory to test batteries for electric and hybrid vehicles.
LG Energy Solutions produces high-nickel NCMA (nickel, cobalt, manganese, aluminum) battery modules at its independent plant located in Holland, Michigan, and supplies them to Toyota’s Kentucky plant. High Nickel NCMA is a battery that increases the battery energy storage capacity by increasing the nickel ratio by about 90%. Toyota plans to assemble the supplied models into packs and install them in new electric vehicle models.
LG Energy Solution will invest approximately KRW 4 trillion to build a battery cell and module production line exclusively for Toyota at its Michigan plant starting at the end of this year. The goal is to start operation in 2025. Once operational, the Michigan plant’s production scale will increase from 26GWh to 40GWh. This place will serve as the ‘Mother Factory’, a key base for LG Energy Solutions’ expansion into the North American market.
LG Energy Solution has secured 9 of the top 10 global automakers based on sales volume as customers. Last year, 5.1 trillion won was invested to build a 40GWh joint venture with Honda of Japan in Fayette County, Ohio, USA. It is the second Japanese automaker to join hands with Toyota. A battery industry official explained, “Considering the fact that Japanese automakers prefer to source parts from domestic companies, this is very unusual,” adding, “This is a recognition of LG Energy Solution’s technology and know-how.”
LG Energy Solutions’ order balance and production capacity are also expected to increase significantly. LG Energy Solution’s order balance at the end of June was 440 trillion won. If this contract with Toyota is calculated at a price per kWh ($120 to $130), the contract size is estimated to be over 30 trillion won. Once LG Energy Solutions builds additional Toyota production lines, it will operate two stand-alone factories and six joint venture factories in the United States. Production volume in the United States will increase to 342GWh.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.