Honda And LG Team Up To Fix Electric Cars' Biggest Issue In The US

Honda has been making major moves in the past few months to shift its focus toward the electric vehicle market. In March of this year, it teamed up with Sony to reveal a joint alliance to manufacture electric vehicles by 2025. Honda is also collaborating with GM to manufacture affordable EVs by 2027, in a move that could disrupt the EV market. Beyond that, the Japanese automaker is about to introduce its first electric vehicle to the U.S market in 2024 — the Honda Prologue.

It's no secret that Honda's EV-related announcements in the past few months are part of its grand strategy to produce 100% zero-emission cars by 2040. In April, the company announced plans to spend $40 billion on its electric fleet in the next decade.  But Honda is not yet done, revealing its strategy to dominate the EV market and solve on of the biggest issues that most electric car manufacturers are facing in the U.S.

In a press release, Honda announced it's teaming up with LG Energy Solution to invest $4.4 billion in lithium-ion battery production plant in the U.S. Once the plant is up and running, it's expected to produce 40GWh of battery capacity annually to meet the demand of its upcoming EV models like the Honda Prologue and Acura Precision.

"Aligned with our longstanding commitment to build products close to the customer, Honda is committed to the local procurement of EV batteries which is a critical component of EVs," Toshihiro Mibe, the CEO and President of Honda said in the press release. 

Since Honda EVs will be sourcing lithium batteries that will be produced in the U.S., its electric cars could be eligible for a tax credit of up to $7,500 under the Inflation Reduction Act. This will give Honda a competitive advantage since most EV manufacturers that produce their batteries overseas are not eligible for that tax rebate.

Honda is yet to disclose the location of this proposed plant with LG, but Nikkei Asia reported that it might be in Ohio. Honda already has an established manufacturing facility in Ohio, and an EV battery production plant close to it would be convenient. Nikkei Asia also reports that Honda will have a 49% in the joint venture, while LG Energy Solution will control 51%.

The construction of the Honda-LG battery production plant is scheduled to start in early 2023, and is expected to wrap up by 2025.