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LG Energy Solutions (KS:373220), the world’s third-ranked electric vehicle battery maker, announced Friday that the company will resume a stalled U.S. battery project with a $5.6 billion investment in Arizona to qualify for federal incentives rolled out under the Inflation Reduction Act (IRA).
The battery maker said in June it was reassessing what was then a 1.7 trillion won (KRW 1 = $0.000771) investment plan because of “unprecedented” economic conditions, just three months after it was unveiled.
With the new investment plan, LG joins a growing list of suppliers and car makers expanding battery production in the United States, encouraged by the IRA’s $369B in subsidies. The company currently supplies Tesla Inc (NASDAQ:TSLA), Lucid Group Inc (NASDAQ:LCID) and other automakers with EV batteries.
The announcement follows a previous announcement by LG in January that it had been in “active discussion” with Tesla and EV startups to supply batteries from the proposed factory.
“When LGES first announced its Arizona plan, Tesla was probably not in the proposed plant’s client list, but it is now likely to be in the list and one of major reasons why investment has increased sharply,” said analysts at Meritz Securities.
The Arizona plant is the second U.S. battery project LGES has announced since the IRA became law in August. The company announced a $4.4B battery plant in Ohio with Japan’s Honda Motor Co Ltd ADR (NYSE:HMC) in October.
“The company’s decision to increase investment…comes from rising demand from EV makers for locally manufactured high-quality, high-performance batteries in an effort to satisfy the Inflation Reduction Act’s EV tax credits,” LGES said in a statement.
Shares of TSLA, LCID and HMC are down 1.75%, 1.04% and 0.27% respectively in afternoon trading on Friday.
