Toyota investment helps LG Chem comply with US regulations

LG Chem's cathode materials plant in Gumi, North Gyeongsang Province / Courtesy of LG Chem

LG Chem said Tuesday that Japan's Toyota Tsusho has become the second-largest shareholder in its cathode materials plant in Gumi, North Gyeongsang Province.

Toyota Tsusho, a trading company and member of the Toyota Group, acquired a 25 percent stake from China's Huayou Cobalt, which previously held 49 percent.

With Huayou Cobalt becoming the plant's third-largest shareholder — holding a 24 percent stake — LG Chem is now in compliance with the recently revised U.S. Inflation Reduction Act (IRA), which excludes companies from tax credits if prohibited foreign entities own more than 25 percent of their shares.

"Toyota Tsusho's equity participation marks a pivotal turning point as LG Chem strengthens its cathode supply competitiveness under the U.S. IRA framework," LG Chem CEO Shin Hak-cheol said. "We will further solidify our leadership in the battery materials market on the strength of world-class products and powerful global partnerships."

Toyota Tsusho plays a vital role in Toyota Motor's raw material procurement. According to LG Chem, the Japanese trading firm will supply a significant portion of cathode materials produced at the Gumi plant to battery manufacturers in North America.

With an annual production capacity of 66,000 tons, the Gumi plant produces cathode materials with custom-designed metal feedstock instead of precursors.

In 2023, LG Chem signed a contract to provide Toyota Motor Engineering & Manufacturing North America with 2.9 trillion won ($2 billion) worth of cathode materials, representing its first cathode material partnership with the world's largest automaker.

The Korean firm also secured orders for its cathode materials last year from Prime Planet Energy & Solutions, a joint venture between Toyota Motor and Panasonic.