Honda Motors and LG Energy Solution have entered into a joint venture to build a $4.4 billion EV battery manufacturing unit in the U.S. According to a report by Bloomberg, Honda Motors and LG Energy will share stakes in the ratio of 49:51 and Honda Motors has proposed an investment of roughly $1.7 billion in the joint venture.
The plant will have an annual production capacity of approximately 40GWh and the batteries produced will be supplied exclusively to Honda facilities in North America. The construction of the new JV plant will begin in early 2023 and the mass production of advanced lithium-ion battery cells is expected by the end of 2025. We don’t have official confirmation yet about the location of the gigafactory but if sources are to be believed the plant will be set up in Ohio.
In a joint press release on August 29, the top officials of both companies in their statement said,
Youngsoo Kwon, CEO of LG Energy Solution said:
“Our joint venture with Honda, which has a significant brand reputation, is yet another milestone in our mid to long-term strategy of promoting electrification in the fast-growing North American market”.
“Since our ultimate goal is to earn our valued customers’ trust and respect, we aspire to position ourselves as a leading battery innovator, working with Honda in achieving its core initiatives for electrification, as well as providing sustainable energy solutions to discerning end consumers.”
Toshihiro Mibe, President, CEO and Representative Director of Honda Motor Co., Ltd. said:
“Honda is working toward our target to realize carbon neutrality for all products and corporate activities the company is involved in by 2050.”
“Aligned with our longstanding commitment to build products close to the customer, Honda is committed to the local procurement of EV batteries which is a critical component of EVs. This initiative in the U.S. with LGES, the leading global battery manufacturer, will be part of such a Honda approach.”
The Japanese automaker aims for 100% electrified vehicle sales by 2040 and plans to spend roughly $36 billion over the next decade on its push into EVs. But presently it is fairly behind in the EV race, it does not have a single pure electric vehicle for sale in North America. With this big announcement, Honda seems to be putting together a plan to accelerate its EV strategy as it aims to produce about 800,000 electric cars annually by 2030 for North America. Globally it expects to introduce 30 EV models and produce 2 million EVs annually by 2030.
Honda joins a growing list of automakers establishing partnerships with battery makers and others to achieve economies of scale. Honda had earlier partnered with GM to build two EV models on GM’s Ultium battery platform. Recently a video of Honda’s first all-electric SUV co-developed with GM was posted online which is scheduled to launch in 2024 alongside an all-electric Acura SUV.
Honda had said it will introduce its own EVs based on the company’s own platform called “e:Architecture” in 2026. The scheduled production timeline of the new battery joint venture suggests that Honda’s next generation of EVs will be supplied with batteries from this plant.
With the Inflation Reduction Act passing in the US, automakers are required to manufacture the batteries for electric cars in the US in order to qualify for federal tax credits. And those batteries also should be made from materials sourced from inside the US or from a country with whom the US has a free trade agreement. In order to secure a maximum $7,500-a-car subsidy, automakers outside of the U.S have been forced to restrategize their plans. And the law is doing exactly as intended, bringing manufacturing back to the US. Hereby, Honda is the newest in the list of automakers looking to manufacture on US soil.