Global giga investments tip scale in favour of US

Since the US Inflation Reduction Act was unveiled on August 16, 2022, billions of battery investment dollars in the country have been announced.

On August 29, LG Energy Solution and Honda Motor said they had agreed to establish a joint venture company to produce lithium ion batteries in the US exclusively for Honda plants in North America to power battery electric vehicles (BEVs) sold in North America.

Fast forward to January 13 and the partners revealed their 40GWh plant would be in Ohio, with their overall investment related to the joint venture projected to reach $4.4 billion.

LG has a majority 51% stake in the tentatively-named L-H Battery Company joint venture. Construction of the plant is to start this year with completion scheduled by the end of 2024 and the start of mass production by the end of 2025.

Meanwhile, Toyota is pushing ahead with an expansion of its Toyota Battery Manufacturing North Carolina site following the announcement last August 29 of $2.5 billion in additional investment for the project.

Toyota said battery production is to start in 2025 for hybrid electric vehicles and BEVs.

Jane Nakano, a senior fellow in the energy security and climate change program at the Center for Strategic and International Studies in Washington, said that under the Inflation Reduction Act, tax credits that came into effect in January are available at different levels to both new and used EVs, and also for non-passenger vehicles.

Specifically, half of the EV tax credit is available if EV battery components are manufactured or assembled in North America. The other half of the credit is available if battery minerals are extracted, processed, or recycled in the US or come from a country that has a free trade agreement with the US.

“The number of eligible models will likely decrease as the mineral content threshold rises to 80% by 2027, and the battery component manufacturing and assembly threshold will rise to 100% by 2029,” Nakono said.

“If companies wish to access the credits, they will need to change their production plans and build new supply chains, potentially slowing EV deployment.”

However, she said the share of EVs in the total light-duty vehicle sales was still expected to hit 57% by the end of the decade as a result of the Inflation Reduction Act.

Nakono said the US vision for secure EV supply chains has “an undeniable dose of geopolitical assertiveness”, because the law prohibits the application of EV tax credits where any components or critical minerals are sourced from a foreign entity of concern, such as China, Russia, Iran, or North Korea.

But how the US addresses trade concerns from close partners such as the EU, South Korea or Japan is an issue. Some of them are also “important investors in the emerging US EV battery supply chains and this warrants close attention,” said Nakono.

European fears of battery investments draining away to other parts of the world were heightened by the publication of analysis indicating that 13 gigafactories being built in seven emerging markets are set to lead a surge in batteries capacity to around 104GWh by the end of the decade.

Benchmark Source’s ‘Gigafactory Assessment’, released on December 13, said the new plants being built across seven countries including Malaysia, Indonesia and India would be enough for nearly two million EVs.

Further analysis by Benchmark indicates that the US is outpacing Europe in the battery gigafactories investment race, following tax incentives unveiled by the federal government in the Inflation Reduction Act.

A total of 242GWh of battery ca- pacity was added to the US pipeline in the second half of 2022, an increase of 34.3% since July, according to Benchmark’s separate ‘Lithium ion Battery Gigafactory Assessment’, released on November 23.

In comparison, Europe’s battery capacity pipeline increased by 16.7% or 170 GWh over the same period, with Chinese companies responsible for all new gigafactories.

Benchmark analyst Evan Hartley said: “The effect of the Inflation Reduction Act can be clearly seen within the announced North American pipeline, and while the European pipeline has increased, that growth is more stable, continuing the trend seen throughout the year.”

In its December 13 Gigafactory Assessment, Benchmark said the list of developing economies where 13 gigafactories are being built includes Turkey, where South Korea’s SK Innovation plans to build a battery plant with Ford and local player Koç Holding.

The plant in Ankara is to start production of high-nickel NCM batteries in 2025.

Benchmark says the developing economies’ gigafactories should come online by as early as 2026 and add about 78GWh capacity initially, which would be scaled to 104GWh by the end of 2030, led by Malaysia. According to the analysis, the gigafactories would contribute about 37.6% of Asian (excluding China) capacity of 205GWh by the end of 2026 and about 40.5% by the end of 2030.

Benchmark says the investment in gigafactories in emerging markets comes as EV sales start to accelerate in Southeast Asia and India, highlighting the growth potential beyond the major developed markets.