SEOUL, Nov 22 (Reuters) – On Tuesday, the South Korean company LG Chem Ltd (051910.KS) made the announcement that it plans to invest more than $3 billion in the construction of a battery cathode factory in Tennessee. This move is being made by the corporation in order to cater to the ever-increasing demand for electric vehicle parts in the United States.
This is one of the first major electric vehicle investments that a South Korean company has discussed making in the United States. This new rule, which was passed in the United States in August and makes it more expensive for automakers and battery suppliers to get parts from China, makes this one of the first major electric vehicle investments that a South Korean company has discussed making in the United States.
Following the publication of the news, the company’s stock had an increase of 1.9%, which was greater than the rise of 0.3% seen in the market (.KS11). According to LG Chem, the company is also attempting to collaborate with various industries involved in mining and recycling in order to assist its clients and fulfil the requirements of the recently passed Inflation Reduction Act.
LG Chem and General Motors Establish New Battery Venture
Ultium Cells is the name of the new battery joint venture that General Motors (GM.N) and LG Chem’s subsidiary, LG Energy Solution Ltd (LGES), have established together. It is anticipated that LG Chem will provide cathode materials to this enterprise (373220.KS).
LGES, a company that manufactures batteries for automobile manufacturers such as Tesla Inc. (TSLA.O), Ford Motor Co. (F.N), and Hyundai Motor Co. (005380.KS), increased its revenue forecast for 2022 from 22 trillion won to 25 trillion won ($18.4 billion) last month. The company cited new projects from automobile manufacturers as the reason for the increase.
The NCMA chemical will be used at the new LG Chem factory to produce battery cathodes consisting of nickel, cobalt, manganese, and aluminium. The NCMA battery, which accounts for around 90% of its total composition, enables manufacturers to make use of cobalt at a lower cost and reduces their reliance on China for the refining and processing of raw materials.
According to the terms of the Inflation Reduction Act, beginning in the year 2020, battery manufacturers in the United States will no longer be eligible for tax incentives unless they source at least forty percent of their critical materials from the United States or a free-trade partner. This percentage will reach 80 percent by the year 2027.
Automakers such as Hyundai Motor (005380.KS) and Kia Corp (000270.KS) have been hit particularly hard by the new rule, which immediately stopped credits for nearly 70 percent of the 72 car models that were previously eligible for EV subsidies. This has resulted in a significant loss of revenue for these automakers.
Yoon Suk-yeol, the president of South Korea, is rumoured to have approached Joe Biden, the vice president of the United States, at the G20 conference earlier this month and begged him to cease discriminating against South Korean companies.
It was stated that Vice President Biden had stated that South Korean investment in the economy of the United States ought to be taken into consideration when the bill is enacted.
The factory is expected to begin full-scale production in the second half of 2025, according to a statement released by LG Chem. This will result in the creation of more than 850 new jobs.