The shift to electric vehicles is expected to move forward rapidly in the US, and Honda wants to secure batteries for its own vehicles. This will be Honda’s first EV battery plant.
The US is also moving to corral EV production within its own borders. Honda aims to develop a stable supply of batteries by teaming up with the South Korean company.
Honda and LG Energy will establish a joint venture to produce lithium-ion batteries in Ohio, where Honda’s main plant is located. LG Energy holds the second-largest share of the global battery market, after China’s Contemporary Amperex Technology (CATL). In addition to General Motors, the company has established a joint venture to make batteries in North America with Europe’s Stellantis to increase its production capacity.
LG Energy has an annual production capacity of 30 gigawatt-hours at its plants with GM and other companies, and it appears that the plant with Honda will be on the same scale. That is enough to supply 500,000 to 600,000 standard electric vehicles.
Honda’s goal is to make all of its new cars either electric vehicles or fuel cell vehicles (FCVs) by 2040. In the US, two electric models equipped with Ultium batteries, jointly developed by GM and LG Energy, will launch in 2024.
Honda plans to launch an EV with a platform (chassis) that Honda will develop independently in 2026. It is expected to be equipped with batteries produced by the automaker’s joint venture with LG Energy. Honda plans to produce about 800,000 electric vehicles in the US by 2030. The company is also considering building a new production line exclusively for electric vehicles.
The US is the world’s second-largest auto market, after China. It is Honda’s main market, accounting for more than 30% of its global sales. On Aug 25, California, the largest auto market in the US, announced regulations that will ban the sale of gasoline-powered vehicles, including hybrids, starting in 2035.
The US also has tax credits for electric vehicles that meet certain criteria, such as batteries produced in a certain area. These measures are expected to further boost EV pickup.
Major automakers’ basic strategy is to procure batteries near where they produce vehicles to keep costs down. In 2021, the company took a 1% stake in CATL to make batteries easier to secure.
Honda plans to use CATL batteries in 10 electric models to be launched in China by 2027. However, the US wants to keep EV production domestic, so partnering with South Koreans reduces the risk of supply chain disruptions due to the US-China conflict and other factors.
It will promote the independent development of next-generation batteries such as all-solid-state batteries, which are safer and smaller than current mainstream liquid batteries and can extend the cruising range.
Honda will invest about ¥43 billion (US$310 million) in its research centre in the Tochigi prefecture city of Sakura to set up a demonstration line to produce batteries. The line will start operation in the spring of 2024. The company aims to install the batteries in vehicles to be launched later in the 2020s and will establish a mass-production system in the future.
China’s CATL leads the auto battery market, followed by LG Energy, SK Innovation and Samsung SDI. As the conflict between the US and China deepens, some US and European automakers view their dependence on the Chinese battery supplier as a risk, leading to an increase in orders to South Korean companies.
The three South Korean companies are expected to have a total of 12 battery plants in operation in North America by around 2025. Japan’s Panasonic is also investing heavily in the US, including the creation of a new EV battery plant in Kansas.