Samsung SDI Co., the world’s No. 6 battery maker, and General Motors Co., the leading US automaker, are set to build a $3.5 billion cell plant in the world’s third-largest electric vehicle market, expecting the eco-friendly automobiles to grow in the long term despite the recent slowdown.

Samsung SDI said on Wednesday it agreed with GM to set up a battery factory to produce 27 gigawatt-hours (GWh) a year, enough for some 350,000 EVs, from 2027 in New Carlisle, Indiana. The two companies are expected to increase the annual capacity to 36 GWh, according to the South Korean battery maker.

The company maker said it plans to invest 2.3 trillion won ($1.7 billion) by March 2028 to secure a 50.01% stake in the joint venture factory.

In March 2023, Samsung SDI and GM inked a memorandum of understanding for the plant with a target of mass production in 2026.

“Building on last year's partnership with GM, the No. 1 automaker in North America, we have established a premium battery production hub to lead the U.S. EV market,” said Samsung SDI CEO Choi Yoon-ho.

The company is in talks with the maker of the Cadillac Lyriq electric sport utility vehicle to manufacture cylindrical batteries with a diameter of 46 millimeters at the new facility.

LONG-TERM GROWTH

Their final agreement came although the global EV and battery industries have been struggling amid the sustained slowdown in the clean vehicle sector.

GM CEO Mary Barra expressed optimism over the EV sector, however.

“The Samsung SDI joint venture is the latest example of GM’s commitment to driving innovation in America,” said Barra in a statement issued by Samsung SDI.

“The EV market and GM sales will continue to grow as more customers experience our EVs, the charging infrastructure builds out and we expand into more segments.”

Samsung SDI and GM have been closely monitoring the rapidly changing market conditions and have decided to invest in the joint venture to stay aligned with the market pace, according to the statement.

FOR UPCOMING GM ELECTRIC MODELS

The new plant plans to manufacture nickel-cobalt-aluminum (NCA)-based high-performance nickel-rich prismatic batteries, which are expected to be equipped in upcoming GM EVs, Samsung SDI said.

Its prismatic batteries not only improve driving range through high energy density but also enhance safety with its metallic exterior and venting system, the company said.

“Through the joint venture with GM, Samsung SDI will gain a foothold in the North American EV market and strive to increase customers for its top-quality prismatic batteries with ensured safety.,” Samsung SDI said.

The company is already building a battery plant with Dutch-domiciled multinational automaker Stellantis N.V., the world’s fourth-largest automaker, in Indiana while agreeing to establish another one in the US.