LG Chem taps into U.S. electric car battery market

LG Chem, a leading Korean maker of electric vehicle batteries, is accelerating its move into the U.S. market. It plans to start construction of a factory in Michigan in July next year, which will be subsidized by the U.S. federal and state governments.

A combined $300 million will be spent to build the plant, which will start commercial production of batteries for electric and hybrid vehicles in 2012. Nearly half of the investment or $150 million will come in the form of a cash grant from the U.S. federal government, while the state of Michigan will give $130 million in tax credits to LG Chem for the plant construction.

LG Chem`s U.S. unit, Compact Power Inc., was the only foreign company among nine battery makers picked to receive government funding, which is part of $2.4 billion in grants by the Obama administration to develop more fuel-efficient, battery-powered automobiles.

The new plant is expected to create more than 400 jobs there, LG Chem said.



"The latest investment support means that LG Chem`s technology for electric vehicle batteries has been officially recognized by the U.S. government, which help us accelerate our expansion into the U.S. market," Kim Bahn-suk, vice chairman of LG Chem, said.

"A local plant in the U.S. will enhance our ability to supply batteries with our customers, which will enable us to become a major company in the battery market in the United States, the world`s biggest car market," he said.

In 2000, LG Chem established Compact Power Inc. in Troy, Michigan, for research of mid- and large-sized lithium-ion batteries and its entry into the North American market.



Leader in green car batteries



LG Chem is a strong candidate to lead the promising electric vehicle battery market, winning a slew of battery deals with leading automakers such as General Motors and Hyundai Motor. Analysts expect that LG Chem may be able to supply its batteries with Ford and Volkswagen.

In January, LG Chem secured a contract to provide lithium-ion batteries for General Motors` Chevrolet Volt plug-in car, which will be the world`s first commercial electric vehicle.

In August, LG Chem was also picked as the sole supplier of batteries for GM`s Buick plug-in vehicle, which will hit showrooms in 2011.

To produce batteries for GM cars, LG Chem in June broke ground for the construction of a 1 trillion won ($8.6 billion) electric-car battery plant in the Ochang Techno Park in Cheongwon, North Chungcheong Province. The new plant, scheduled to be opened in the first half of next year, will supply lithium-ion batteries to General Motors from the second half of next year.

LG`s batteries also power Hyundai Motor`s Avante, Korea`s first hybrid car, which was rolled out in July, and Kia Motors` Forte hybrid vehicle, which was launched in September. Hyundai Motor is the world`s No. 5 carmaker, along with its affiliate Kia Motors.

LG is also developing lithium-ion batters for Hyundai Motor`s hybrid version of its Sonata sedan.

In October, LG Chem agreed to supply batteries for neighborhood electric vehicles with CT&T, a Korean electric vehicle maker. CT&T exported 4,000 units of NEVs to the United States last year, and plans to build 40 small electric-vehicle assembly plants across the United States.



Breaking Japan`s battery dominance



LG Chem and other Korean battery firms lead the development of lithium-ion batteries, which are emerging as an alternative to conventional nickel-based batteries for electronic cars. With the development of lithium-ion car batteries, Korean firms are seeking to challenge Japanese rivals, which have long dominated the global battery market.

Currently, most hybrid electric vehicles, such as Toyota Motor Corp.`s Prius, are powered by nickel-metal hydride batteries, but these traditional batteries are losing ground to lithium-ion batteries, which are more compact, more powerful and allow longer driving distances.

A lithium-ion battery is a type of rechargeable battery mainly used in portable electronics such as laptops and mobile phones, but they are increasingly being used to power electric or hybrid cars.

Companies are jumping into the market for electric car batteries, hoping to cash in the growing market for electric vehicles. Major carmakers plan to launch a series of electric vehicles to meet higher U.S. fuel-economy standards and increased consumer demand for fuel-efficient vehicles.

LG Chem, a unit of LG Group, aims at achieving 2 trillion won in revenue from its battery business and grabbing more than 20 percent of the global electric vehicle battery market by 2015.

(hjjin@heraldm.com)







By Jin Hyun-joo