LG to invest $4.5bn to meet growing US electric vehicle demand

LG Energy Solution, the world’s largest producer of electric vehicle batteries, will invest more than $4.5bn in the US by 2025 to meet growing consumer demand for non-carbon emitting cars.

The announcement on Friday came just over a month after the US International Trade Commission ruled in the South Korean company’s favour in a dispute with domestic rival SK Innovation over the misappropriation of trade secrets.

The ITC imposed a 10-year ban on SK from importing components to make lithium-ion batteries. The decision dealt a blow to Ford and Volkswagen’s plans to build electric vehicles with SK batteries in the country, although the ruling granted the carmakers a grace period to find a new supplier.

SK has lobbied the White House to overturn the ban, which President Joe Biden must do within 60 days of the decision being made. The president could veto the ruling but a White House block on an ITC ruling would be extremely rare, according to industry officials.

LG said the new investment would create more than 10,000 new jobs and the company would select locations for two plants in the first half of this year.

The South Korean company is also in talks with General Motors to build a second joint venture plant in the US. The facility will have a production capacity similar to their $2.3bn battery plant in Ohio, which will be completed next year. LG has had its own plant in Michigan since 2012. 

“Through these investment plans, LG Energy Solution aims to alleviate the industry concerns around battery supply sufficiency and accelerate the process of expanding its position in the US,” the company said in a statement.

Analysts said LG’s new investment would help ease supply shortages, as Biden aims to increase consumer incentives and electrify the US government’s vehicle fleet as part of his climate change agenda.

“This is a signal to Biden that he doesn’t have to worry about the economic impact of the ITC ruling and also a message to global automakers that they can choose LG instead of SK as their EV supplier,” said Kim Young-woo, an analyst at SK Securities.

LG and SK have been in talks to reach a settlement but remain far apart over the amount of compensation. SK recently made a new offer to LG but the former’s audit committee has said: “The board will review it more thoroughly but those demands that will make continuing our US battery business meaningless or weaken our business competitiveness substantially will not be acceptable.”

LG said SK had not admitted fault and lacked sincerity to resolve the case, although there were “various ways of compensation to satisfy shareholders and investors”.

The companies are facing growing domestic political pressure to pursue a settlement, as Seoul has been dismayed at the rivalry spilling out on to the global stage. South Korea is the world’s largest producer of electric vehicle batteries, controlling more than a third of the global market.

“The government will likely intervene more actively to persuade them to reach a settlement soon,” said Lee Hang-koo, an adviser at Korea Automotive Technology Institute.

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