LG Chem Ltd one of South Korea’s leading chemical manufacturers, announced on Sunday a partnership with Youshan, a subsidiary of China’s Huayou Group. The collaboration aims to establish a joint electric vehicle (EV) battery material plant in Morocco, Reuters reported.
Set to commence production in 2026, the state-of-the-art facility is projected to churn out a staggering 50,000 metric tonnes of lithium-phosphate-iron (LFP) cathode materials annually. This production capacity is equivalent to meeting the demands of 500,000 entry-level EVs, according to LG Chem’s official statement.
The Morocco-based plant is positioned to supply LFP cathodes to the North American market, thereby qualifying for subsidies under the U.S. Inflation Reduction Act (IRA). This act, designed to reduce American dependence on the Chinese supply chain for EVs, necessitates that at least 40% of the critical minerals’ value used in an auto battery be sourced from the United States or a free-trade partner. Compliance enables manufacturers to access a substantial $3,750 tax credit per vehicle. South Korea, which has a free-trade agreement with the United States, is ideally positioned to benefit from this arrangement.
This venture signifies a pivotal shift for LG Chem, a renowned manufacturer primarily associated with the production of more costly nickel-cobalt-manganese (NCM) cathodes. The company is stepping into the LFP cathode sector for the first time, strategically aligning itself with the surging demand for affordable LFP batteries.
This development coincides with the auto industry’s fervent pursuit of economical electric vehicles, with batteries being the most expensive component.
However, LG Chem acknowledges that adjustments in equity share may be required to align with the U.S. Treasury Department’s guideline pertaining to “foreign entities of concern.” This provision, specifically aimed at China, underlines the complexities of global collaboration in the EV battery industry.