Hyundai Motor Co. has taken another step closer to receiving US tax credits for its electric cars sold in the country by signing a 5.7 trillion won ($4.3 billion) deal with LG Energy Solution Ltd. to build a battery manufacturing plant in Savannah, Georgia.
The battery plant, to be located in Savannah’s Bryan County, will break ground in the second half of this year to kick off commercial production around the end of 2025, Hyundai said in a statement on Friday.
Once up and running, the facility will have an annual production capacity of 30 gigawatt-hour (GWh) battery cells, enough for 300,000 electric vehicles, it said.
For this, the two partners this year will establish a 50-50 joint venture, tentatively named LGES-HMG Battery JV, with a total 5.7 trillion won investment.
Hyundai Motor Group, South Korea’s top automaker, said its three affiliates will invest a combined 1.43 trillion won in the JV. Specifically, Hyundai Motor will chip in 708 billion won while Hyundai Mobis Co. and Kia Corp. will invest 286.1 billion won and 436.2 billion won, respectively.
LG Energy said that its US affiliate LG Energy Solution Michigan Inc. will spend $1.11 billion to own a 50% stake in the JV.
Hyundai and LG’s cash contribution to the JV constitutes only half the 5.7 trillion total. The JV will finance the other half through borrowings, the companies said.
The investment and financing will be completed by the end of 2028.
TO BENEFIT FROM US TAX BREAKS
“We will create a strong foundation to lead the global EV transition by establishing a new EV battery cell plant with LG Energy Solution,” said Chang Jae-hoon, chief executive of Hyundai Motor.
LG Energy CEO Kwon Young-soo said: “By further advancing our product competitiveness and global operational expertise, LG Energy Solution will commit our best efforts to offering the ultimate sustainable energy solutions to our customers.”
With this JV, LG Energy now has seven battery plants operating or under construction in the US.
The new battery plant will be built near Hyundai’s new electric vehicle manufacturing plant, Hyundai Motor Group Metaplant America LLC (HMGMA), currently under construction.
Battey cells produced at the JV will be shipped to Hyundai Mobis’ US plant where it assembles them into battery packs and then supply them to the Hyundai Motor plant in Montgomery, Alabama and a Kia factory in West Point, Georgia for production of Hyundai, Kia and premium Genesis EV models.
The new battery plant will help Hyundai enhance its competitiveness in the US market by allowing its car buyers to receive tax credits from the US government under the Inflation Reduction Act.
The IRA requires EV makers to use batteries with a certain percentage of key materials from the US or its free trade partners.
The act, aimed at diminishing China’s power in the global EV market, is expected to impact Korea’s finished car makers. Hyundai Motor Group’s main EVs, such as the IONIQ 5 and the EV6, are currently manufactured in Korea and exported to the US market.
To make things easier for Hyundai and its customers, the company said it will move up the start of its $5.5 billion Metaplant to the second half of 2024 from an original plan for 2025.
In a similar move, Hyundai said last November that it is jointly building a 2.5 trillion won battery plant with another Korean battery maker SK On Co., a unit of SK Innovation Co., in Georgia.
The Hyundai-SK battery JV with an annual production capacity of 35 GWh is slated to begin operations in the first quarter of 2026.
HYUNDAI-LG BATTERY PARTNERSHIP IN INDONESIA
The Hyundai-LG battery JV is the two companies’ second such partnership after a $1.1 billion project in Indonesia.
In 2021, Hyundai and LG began building a joint battery plant in Karawang New Industry City, near Jakarta. The plant with an annual capacity of 10 GWh of battery cells, enough for over 150,000 EVs, is scheduled to begin commercial production in the first half of 2024.
Hyundai and LG Energy have long been partners in automobile electrification.
Their partnership began in 2009 when Hyundai rolled out its first electrified model, the Hyundai Elantra Hybrid, equipped with an LG battery.
LG currently supplies its batteries to Hyundai’s Kona EV and the IONIQ 6, while SK On’s batteries are installed in the IONIQ 5, IONIQ 6, EV6, EV9, GV60 and GV70 models.
Hyundai’s EV push is in line with the Joe Biden administration’s goal of 40-50% zero-emission vehicle sales in the US by 2030.
Hyundai, together with Kia, plans to sell 3.64 million fully electric vehicles annually by 2030 worldwide, including more than 1 million units or 30% of the total in the US market.
According to market tracker Counterpoint Research, annual sales of electric sedans in the US will reach 10 million units by 2030.
