LG Energy Solution (LGES), one of the world's largest lithium-ion battery manufacturers, will soon resume its new investment in Arizona, actually significantly expanding its size.

The South Korean manufacturer has completed revision of the project announced in March 2022, which was put on hold shortly after announcing.

Initially, LG Energy Solution intended to produce in Queen Creek, Arizona, cylindrical lithium-ion batteries - 11 gigawatt-hours (GWh) per year - starting in 2024. At the time, the investment was estimated at $1.3 billion (1.7 trillion KRW).

According to LGES, the project will not only be resumed, but also expanded because after the introduction of the Inflation Reduction Act of 2022 (IRA), demand for locally manufactured batteries for EVs is increasing.

"The company's decision to increase investment in cylindrical EV battery production in North America comes from rising demand from EV makers for locally manufactured high-quality, high-performance batteries in an effort to satisfy the Inflation Reduction Act (IRA)'s EV tax credits."

LG Energy Solution will invest several times more - about $5.5 billion (7.2 trillion KRW) in the new project, which will include two separate facilities - one for cylindrical batteries for electric vehicles (EV) and another for lithium iron phosphate (LFP) pouch-type batteries for energy storage systems (ESS):

  • cylindrical (2170-type) li-ion batteries (NCM chemistry) for EVs: 27 GWh/year
    investment: $3.2 billion (4.2 trillion KRW)
    production start in 2025
  • pouch li-ion batteries (LFP chemistry) for energy storage systems (ESS): 16 GWh/year
    investment: $2.3 billion (3.0 trillion KRW)
    production start in 2026
  • total: 43 GWh/year (EV/ESS batteries) and $5.5 billion (7.2 trillion KRW) investment

Just for reference, here are the initial targets for the project:

  • Type: wholly-owned subsidiary
  • Investment: $1.3 billion (1.7 trillion KRW)
  • Location: Queen Creek, Arizona
  • Production capacity: 11 GWh/year
  • Battery type: cylindrical batteries for EVs and electric tools
  • Construction: to begin in the second quarter of 2022
  • Mass production: to start in 2024

As we can see, there will be significantly more cylindrical battery cells (2170-type) produced at the site than initially planned, and additionally, LG Energy Solution adds a noticeable volume of batteries for ESS - interestingly pouch version of the LFP (lithium iron phosphate) chemistry.

Previously LG Energy Solution was focused on the nickel-rich NCM chemistry. However, the company confirmed the LFP chemistry by the way of its IPO in 2022 (after rumors indicating the move in 2021). In May 2022 it was reported that pouch LFP cells (for ESS) will be produced in the upgraded LGES plant in Holland, Michigan.

The choice of pouch LFP cell type is not accidental as it was the main LGES product and the company reportedly intends to use the same form factor (for easy use in the same modules and racks as before) and equipment at the plants. There will be some new LFP cells in the future, according to the reports.

In general, the vast majority of LFP battery cells are produced in the prismatic form factor (some in the cylindrical form factor). Let's pay attention to that as there might be some EV-versions of the LGES batteries in the future, for entry-level cars.

LG Energy Solution does not reveal which companies signed upn for cylindrical EV batteries from Arizona, although there might be multiple customers, including Tesla.

Bloomberg noted that the company is also in talks with Toyota, while in Ohio the company is partnering with Honda for a new joint venture plant. Of course, LG Energy Solution is also partnering with GM (several plants in the US) and with Ford among others.

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