America may be home to some of the most prominent electric vehicle makers on the globe, but THE COUNTRY has made little headway in the EV battery segment. This segment has consistently been dominated by Asian players, with companies from China and South Korea supplying many of the world’s electric vehicle battery components. As such, the U.S. government is keen on breaking Asia’s stranglehold on the electric vehicle battery space by encouraging local battery production.
A recently announced partnership between Japanese automaker Honda and South Korean battery manufacturer LG Energy Solution will increase local production of electric vehicles. Although the partnership will be primarily driven by Asian companies, it will at least increase the number of electric vehicle battery packs that are developed and deployed within the United States. The two companies are set to invest $4.4 billion in a joint venture in the U.S. that would produce batteries for Honda EVs on the U.S. market.
The companies recently announced that they will begin construction of the battery factory in early 2023, even though they still haven’t settled on a site for the plant; mass lithium-ion battery cell production is expected to begin by the end of 2025. LG and Honda will establish the joint venture this year upon receiving regulatory approval to close the deal.
According to LG Energy Solutions CEO Youngsoo Kwon, LG’s joint venture with automaker Honda is another milestone in the South Korean battery maker’s mid-to-long-term strategy of electrification in the United States, which is currently one of the largest EV markets on the globe after China and Europe. A joint statement from both Honda and LG revealed that the factory will only produce EV batteries for the Honda EVs assembled within the U.S.
LG Energy Solutions is one of the largest players in the lithium-ion battery segment. It currently has partnerships with American automakers such as Ford Motor and General Motors and South Korea’s Hyundai Motor Group to develop lithium-ion battery packs for EVs. The battery maker will bring a wealth of knowledge and experience to its joint venture with Honda, not to mention all the supply chain connections it developed as it carved a share of the battery market for itself.
The partnership will also allow Honda to take advantage of a new EV tax credit of up to $7,500. To qualify for this credit in full, electric vehicles must be equipped with a battery pack that was manufactured within the U.S. with at least 40% battery minerals that were either mined or recycled on the North American continent.
As the regulatory environment keeps evolving in support of the electric vehicle industry, we are likely to see manufacturers such as Lucid Motors (NASDAQ: LCID) make deeper inroads into the domestic and international EV market.
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