Korea’s LG Chem and Japan’s Toyota Group have partnered in cathode material manufacturing to supply materials eligible for battery-maker tax credits under the US Inflation Reduction Act.
On Tuesday, LG Chem announced that Toyota Tsusho Co., the trading arm of Toyota Group, acquired a 25 percent stake in LG’s cathode material plant in Gumi, North Gyeongsang Province, making it the second-largest shareholder after LG Chem, which retains 51 percent.
The investment is estimated at around 170 billion won ($122.6 million).
With its initial acquisition of a stake in LG Chem’s facility, Toyota Tsusho plans to supply products from the Gumi plant to battery-makers in North America.
The acquisition also reduced the stake of LG Chem’s Chinese partner, Huayou Cobalt, from 49 to 24 percent. The change eliminated any risk of the plant’s customers losing eligibility for Advanced Manufacturing Production Credit, a US tax incentive for domestic battery production under the IRA.
“Toyota Tsusho’s stake marks a significant turning point for LG Chem in responding to US IRA regulations and enhancing our competitiveness in global cathode material supply,” said Shin Hak-cheol, LG Chem vice chair and CEO.
Under the IRA, companies with more than 25 percent of voting shares, stock, or board seats held by countries it calls "covered nations" — China, Russia, North Korea, or Iran — are classified as "foreign entities of concern," or FEOCs. Starting in 2026, only batteries containing at least 60 percent of materials from non-FEOCs will qualify for the tax credit, with the threshold gradually rising to 85 percent by 2030.
In response, LG Chem sought to reduce the stake its Chinese partner had in the facility, a major manufacturing base with an annual capacity of 66,000 tons.
The new partnership builds on years of collaboration between LG Chem and Toyota in cathode materials.
In 2023, LG secured a contract from Toyota Engineering & Manufacturing North America, the Japanese automaker’s North American manufacturing arm, for 2.9 trillion won worth of cathode materials through 2030. This was followed by another deal last year to supply materials for Prime Planet Energy & Solutions, the joint venture between Panasonic and Toyota Motor Co., Toyota Group’s automaker.
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