Japanese legacy automaker Toyota announced in a press release the successful signing of a battery supply deal with South Korean giant LG Energy Solutions (LGES) for its US operations.
Supply deal details
LGES committed to supplying Toyota’s US-based electric vehicle assembly operations with li-ion battery modules.
The deal demands that the South Korean battery giant deliver an annual capacity of 20GWh by 2025. The battery modules will comprise high-nickel NCMA (nickel, cobalt, manganese, aluminum) pouch-type cells.
The battery supply is crucial for Toyota’s electrification strategy and to gain a significant advantage with the US tax credits for domestic production.
“At Toyota, our goal is to reduce carbon emissions as much as possible, as fast as possible. Having secure supplies of lithium-ion batteries at scale with a long-term relationship to support Toyota’s multi-pathway approach and growth plans for BEVs in North America is critical to achieve our manufacturing and carbon reduction plans. Working with LG Energy Solution, we are excited to be able to offer products that will provide the performance and quality our customers expect.”
Tetsuo “Ted” Ogawa, Toyota Motor North America President and CEO
LGES to invest $3B in new production lines for Toyota’s battery modules
In order to produce the battery modules, LGES will erect new production lines in Michigan exclusive to Toyota. It will allocate a total amount of KRW 4 trillion (approximately USD 3 billion).
LGES expects to complete the construction in 2025. The battery modules will initially undergo assembly into battery packs in Toyota Motor Manufacturing Kentucky. Then, Toyota will begin equipping the battery packs into its electric vehicle models.
“We’re excited to have Toyota, the best-selling global automaker, as our new customer. With our 30 years of experience in lithium-ion batteries, we will provide innovative power solutions to support Toyota’s push further into battery electric vehicles. The agreement also presents another big opportunity for us to strengthen our production capacity in North America, thereby bringing more real-life, large-scale progress toward electrification in the region.”
Youngsoo Kwon, LG Energy Solution CEO
Toyota’s 2030 target
Toyota previously announced plans to develop and launch a total of 30 all-electric vehicle models across the world under the Toyota and Lexus brands.
It also set an annual production target of 3.5 million BEV units by the end of this decade. As of September, BEVs only accounted for less than 0.40% of the Japanese automaker’s 1.6+ million vehicle sales in North America.
The deal is apparently LGES’ biggest single supply deal beyond its JV agreements. It is also important to note that this battery supply partnership will enable both companies to take advantage of the IRA’s federal tax credits in the US. It will also aid Toyota in accelerating its electrification goals.
