LG Energy Solution to supply batteries to Toyota
LG Energy Solution's (LGES) battery plant in the U.S. state of Michigan / Courtesy of LGES
LG Energy Solution (LGES) agreed to supply 20 gigawatt-hours of high-nickel NCMA (nickel, cobalt, manganese and aluminum) battery modules annually to Toyota Motor from 2025 to 2035 for the Japanese carmaker’s battery electric vehicles (BEVs) produced in the U.S. state of Kentucky, the Korean battery maker said Thursday.
The deal is LGES’ single largest supply agreement secured outside of joint venture agreements.
Although the Korean firm kept the deal’s size confidential, it is expected to generate an additional $22 billion in revenue through the contract, considering that high-nickel battery cells are sold for $110 to $130 per kilowatt-hour.
To fulfill the supply agreement, LGES will invest 4 trillion won ($3 billion) in its Michigan plant, to build new production lines for battery cells and modules exclusively for Toyota by 2025. The modules will go to Toyota’s Kentucky plant to be assembled into battery packs for BEVs.
This is the first time for LGES to sign a battery supply agreement with Toyota.
As a result, the Korean firm has been able to supply its batteries to the world’s top five carmakers ― Toyota, Volkswagen, Renault-Nissan-Mitsubishi Alliance, Hyundai Motor and General Motors.
“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 BEVs,” LGES CEO Kwon Young-soo said. “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.”
Toyota aspires to offer 30 BEV models globally across its Toyota and Lexus brand nameplates and produce up to 3.5 million BEVs annually by 2030.
“At Toyota, our goal is to reduce carbon emissions as much as possible, as fast as possible,” Toyota Motor North America CEO Tetsuo Ted Ogawa said. “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 LGES, we are excited to be able to offer products that will provide the performance and quality our customers expect.”
Meritz Securities analyst Rho Woo-ho said the mega-size deal will also benefit LG Chem and SKC.
“In August last year, SKC established a joint venture with Toyota Tsusho to supply copper foil,” he said. “LG Chem is in talks with Toyota to supply cathode materials in the U.S. market.”
The analyst added that LGES is expected to sign an additional partnership with Ford Motor in the European market by the end of this year at the earliest, based on its solid bargaining power in the global battery industry.