Toyota's Partnership with LG for Battery Supply

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【Summary】Toyota has signed a massive battery supply deal with LG in the US. LG will invest $3 billion in its Michigan plant to supply Toyota with batteries for electric cars. The deal is spurred by the US Inflation Reduction Act and LG will provide nickel, cobalt, manganese, and alluvium puck-type cells. LG will invest in the Michigan plant and supply battery packs to Toyota's Kentucky plant for assembly. This is LG's largest single supply agreement and they also have joint ventures with Honda and GM.

FutureCar Staff Oct 06, 2023 11:19 PM PT

Toyota's Partnership with LG for Battery Supply

Toyota has recently announced a significant battery supply deal with LG in the United States. As part of the agreement, LG will invest $3 billion in its Michigan plant to enhance its battery production capacity and meet Toyota's demand for electric vehicle (EV) batteries.

Starting from 2025, LG Energy Solution will supply Toyota with an annual capacity of 20 GWh. This decision was influenced by the US Inflation Reduction Act (IRA), which aims to reduce the federal government budget deficit and curb inflation. The IRA includes incentives to boost domestic production of EVs, batteries, and raw materials.

The batteries provided by LG for Toyota will be nickel, cobalt, manganese, and alluvium puck-type cells. These batteries will be manufactured at LG's plant in Holland, Michigan. The battery packs will then be used in electric Toyotas assembled in the United States, including a model set to be manufactured at the Toyota site in Kentucky, which will enter production in 2025.

Toyota has set ambitious goals for its electric vehicle lineup, aiming to have 30 Toyota- and Lexus-branded electric vehicles by 2030. To meet this demand, LG Energy Solution plans to 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 the Toyota plant in Kentucky, where they will be assembled into battery packs and fitted to the future electric cars.

The 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. For the Ultium battery joint venture, LG and General Motors are building a separate plant in Lansing, Michigan, with a $2.1 billion investment. The batteries produced there will be used in 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 operating or planned battery plants in the United States and Canada, with a combined annual production capacity of 1.3 terawatt-hours. This capacity is enough 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 Prime Plant Energy & Solutions joint venture. This venture involves a $3.8 billion investment and aims to support Toyota's goal of producing up to 3.5 million electric cars per year by 2030.

While Toyota is determined to expand its electric vehicle offerings, they were relatively late to the party. Their first electric car, the bZ4X, based on the e-TNGA architecture developed by Toyota and Subaru, entered production in April 2022.