Tesla's EV battery supplier plans to launch new manufacturing facility in US

South Korea's LG Energy Solution Ltd (LGES) said on Friday it would invest 7.2 trillion won ($5.58 billion) to build a battery factory in Arizona, reviving a project paused last year due to adverse economic conditions. The world's third-ranked electric vehicle battery maker, which supplies Tesla Inc, Lucid Group Inc and other automakers, in June said it was reassessing what was then a 1.7 trillion won investment plan due to "unprecedented" economic conditions, just three months the plan's initial unveiling.

Friday's announcement comes after LGES in January said it had been in "active discussion" with Tesla and electric vehicle startups to supply batteries from the proposed factory.

The new Arizona factory will consist of two manufacturing facilities - one for cylindrical batteries for electric vehicles (EV) and another for lithium iron phosphate (LFP) pouch-type batteries for energy storage systems (ESS), LGES said in a statement.

"The company’s decision to increase investment in cylindrical EV battery production in North America comes from rising demand from EV makers for locally manufactured high-quality, high-performance batteries in an effort to satisfy the Inflation Reduction Act's (IRA) EV tax credits," the company said in a statement.

Automakers and EV battery producers are racing to set up manufacturing in the United States to take advantage of federal subsidies that could generate up to $45 per kilowatt hour (kWh) to offset the costs of production.

LGES, which supplies Tesla, General Motors Co and others, also has production sites in South Korea, China, Poland, Canada and Indonesia.

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Shares of LGES were trading down 1.6% versus a 0.4% fall in the benchmark KOSPI as of 0620 GMT.

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