Toyota LG Battery Deal

Home > Industry Analysis > Content

【Summary】Toyota has signed a $3 billion battery supply deal with LG in the US. LG will invest in its Michigan plant to supply Toyota with batteries for electric cars, starting from 2025. The deal is driven by the US Inflation Reduction Act and LG will provide nickel, cobalt, manganese, and alluvium puck-type cells. The batteries will be used in electric Toyotas assembled in the US, with the aim of producing 30 electric vehicles by 2030.

FutureCar Staff Oct 07, 2023 4:20 PM PT

Toyota has recently entered into a significant battery supply agreement with LG in the United States. In order to meet the demand for batteries in Toyota's electric cars, LG will invest $3 billion in its Michigan plant.

Starting in 2025, LG Energy Solution will provide Toyota with an annual capacity of 20 GWh. This decision was influenced by the US Inflation Reduction Act, which aims to reduce the federal government budget deficit and curb inflation. The act proposes incentives to promote domestic production of electric vehicles (EVs), batteries, and raw materials.

The batteries supplied by LG will be nickel, cobalt, manganese, and alluvium puck-type cells. These batteries will be manufactured at LG's plant in Holland, Michigan and will be used in the electric Toyotas assembled in the United States. One of the electric cars, set to be produced in Toyota's Kentucky site, will enter production in 2025. Toyota plans to have a lineup of 30 Toyota- and Lexus-branded electric vehicles by 2030.

To support the battery supply agreement, LG Energy Solution will invest approximately $3 billion in its Michigan plant to establish new production lines for battery cells and modules. These components will then be transported to Toyota's Kentucky plant, where they will be assembled into battery packs and installed in the future electric cars.

This agreement between Toyota and LG is the largest single supply agreement LG Energy Solution has ever signed. LG also has joint ventures with Honda and GM in the United States. Additionally, LG and General Motors are building a separate plant in Lansing, Michigan, with a $2.1 billion investment, for the Ultium battery joint venture to supply batteries for GM electric cars. LG Energy Solution will also supply batteries to other automakers, including Stellantis, Honda, and Hyundai, from its North American plants.

According to Reuters, there are currently 37 plants operating or planning to operate in the United States and Canada, with a combined annual production capacity of 1.3 terawatt-hours. This capacity is sufficient to power over 10 million electric cars per year. In comparison, China has an annual production capacity of 6.1 terawatt-hours, according to Benchmark Mineral Intelligence.

In 2025, Toyota plans to open a new battery plant in California in partnership with Panasonic, through their joint venture called Prime Plant Energy & Solutions. This venture involves a $3.8 billion investment. Toyota aims to produce up to 3.5 million electric cars per year by 2030 and has a target lineup of 30 EV models. However, the Japanese automaker was relatively late in entering the electric car market, with their first electric car, the bZ4X, based on the e-TNGA architecture developed by Toyota and Subaru, entering production in April 2022.