U.S. Preps $2.5 Billion for GM Electric Vehicle Battery Venture With LG
With the United States having successfully passed the Inflation Reduction Act over the summer, the financial floodgates have been opened for battery suppliers. Despite often being framed as a massive infrastructure package that would also help tamp down U.S. inflation, the bill also included numerous items from the Biden administration’s climate agenda setting aside billions for industries vowing to go green. This includes the joint venture between General Motors and LG Energy Solution – which will receive $2.5 billion in loans to build three new lithium-ion battery factories.
The cash comes from the Advanced Technology Vehicles Manufacturing (ATVM) loan program and offers favorable terms for Ultium Cells LLC and will help finance the construction of manufacturing plants in Ohio, Michigan, and Tennessee.
According to Reuters, U.S. Energy Secretary Jennifer Granholm will be spending most of Monday proclaiming the loans as a victory in Michigan while meeting with Labor Department Deputy Secretary Julie Su, Michigan Governor Gretchen Whitmer, United Auto Workers (UAW) President Ray Curry, and other officials, automakers and EV battery companies. The group will also reportedly “discuss strategies to recruit and retain a diverse and skilled battery workforce, and the Biden administration's Battery Workforce Initiative.”
The government would like to increase battery production stateside due to how much of the industry is localized to Central Asia. However, due to the Biden administration wanting 50 percent of all U.S. auto production to be electric or plug-in electric hybrid vehicles by 2030 (with gas and diesel cars to be phased out by 2035), leadership believes it can incentivize the industry into building within the U.S. by waving enough cash under the right noses.
But there’s also a stick to accompany the government’s financial carrot. With the EV tax credit system having been rejiggered under the so-called Inflation Reduction Act of 2022, funding is now tied to the domestic content of the EVs battery pack. This encompasses both the materials going into the unit as well as where final assembly takes place and the necessary percentage escalates each year. This means automakers vying to sell EVs in the United States will need to bring manufacturing there in order for their vehicles to qualify for credits of up to $7,500.
Considering the number of domestic partnerships we’ve seen formed between automakers and companies like SK Innovation and LG recently, it seems as though the plan is working. Though a lot of those deals were completed a year before the Inflation Reduction Act was passed, making it hard to know how much credit to give the plan unless your job is to cheerlead for it.
“It is flooring the accelerator to build the electric vehicle supply chain here at home – and that starts with domestic battery manufacturing led by American workers and the unions that support them,” stated Granholm. “This loan will jumpstart the domestic battery cell production needed to reduce our reliance on other countries to meet increased demand and support President Biden’s goals of widespread EV adoption and cutting carbon pollution produced by gas-powered vehicles.”
GM and LG Energy are reportedly considering a fourth U.S. battery plant for Indiana. Though, even without it, the three-plant deal is supposed to yield roughly 6,000 temporary construction jobs and another 5,100 factory positions. As of Monday, Ultium Cells LLC said that the $2.6-billion dollar facility in Michigan should open in 2024 – adding investments for the $2.3-billion battery facility in Tennessee would be increased by an additional $275 million.
If you’re a fierce advocate for electric vehicles, then you’re probably already dancing in the streets. However, those skeptical of any state-backed push for electrification or unfettered government spending are likely to be far less enthusiastic.
[Image: General Motors]
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