LG Chem to invest $3.2 billion to build cathode plant in Tennessee

LG Chem will invest $3.2 billion to build a cathode material plant in Clarksville, Tennessee, aiming to be a major supplier of electric vehicle (EV) battery materials.

LG Chem CEO Shin Hak-cheol, left, and Tennessee Governor Bill Lee shake hands after signing an agreement to build a cathode manufacturing plant in Clarksville, Tennessee, on Tuesday. [LG CHEM]

LG Chem will invest $3.2 billion to build a cathode plant in Clarksville, Tennessee, aiming to be a major supplier of electric vehicle (EV) battery materials.

It will be the largest of its kind in the United States.

The chemical company signed a memorandum of understanding with the Tennessee government Tuesday, with CEO Shin Hak-cheol and Tennessee Governor Bill Lee in attendance.

The factory, which will be on a 1.7 million-square-meter site in Clarksville, northern Tennessee, will have 120,000 tons of cathode production per year. That is enough to make batteries for 1.2 million EVs that can run 500 kilometers (311 miles) on a single charge.

Cathodes account for 40 percent of a battery's cost and their quality plays an important role in the quality of the battery. Nickel, cobalt and manganese are core materials in cathodes.

LG Chem said the Tennessee factory will produce a high-nickel NCMA — nickel, cobalt, manganese and aluminum-based — battery, which excels in capacity, durability and resistance and even supports quick charging.

Ground will be broken in the first quarter of next year, with the goal of starting mass production in late 2025. LG Chem aims to log 20 trillion won ($14.6 billion) in revenue from its battery material business in 2027, from the current 5 trillion won.

The Tennessee facility will run 100 percent on renewable energy.

“LG Chem’s decision to invest $3.2 billion in Clarksville is a testament to Tennessee’s unmatched business climate, skilled workforce and position as a leader in the automotive industry,” said Tennessee Governor Lee. “I thank this company for creating more than 850 new jobs to provide an opportunity to Tennesseans across Montgomery County.”

A rendering of LG Chem's cathode plant in Clarksville, Tennessee [LG CHEM]

Tennessee was the best choice for LG Chem, it said, due to its proximity to key customers, and ease of transporting raw materials. Ultium Cells, a 50-50 joint venture by LG Energy Solution and General Motors, is building a 2.7-trillion-won ($2.4 billion) battery factory in Spring Hill, Tennessee. LG Energy Solution is the world's second-largest battery maker that is 81.8 percent owned by LG Chem.

LG Chem also said the Tennessee facility allows LG Chem to "proactively address the changing dynamics of the global battery material market and with legislation such as the Inflation Reduction Act (IRA)."

Under the terms of the IRA, buyers of EVs assembled in the United States are eligible for a $7,500 tax credit for vehicles purchased after Aug. 16, 2022, extending an existing program that offered a $7,500 tax credit for EV purchases regardless of origin.

After Jan. 1, 2023, content requirements for batteries begin to phase in over a number of years. In 2023, 40 percent of critical-mineral value will have to come from the United States or countries with which the United States has a free trade agreement to qualify for $3,750 of the credit. That number increases 10 percentage points a year to 80 percent in 2027.

Fifty percent of battery-component value will have to come from the United States to qualify for another $3,750 of the tax credit. That number will increase 10 percentage points a year to 100 percent by 2029. To qualify for the subsidy, a vehicle must be completely free of Chinese-made components from 2024 and free of Chinese critical minerals from 2025.

Critical minerals include lithium, cobalt, nickel, tin, tungsten and graphite, while components include cathodes, anodes, electrolytes and separators made with those minerals.

To qualify for the subsidy, a vehicle must be completely free of Chinese-made components from 2024 and free of Chinese critical minerals from 2025.

BY SARAH CHEA [chea.sarah@joongang.co.kr]