South Korea’s LG Chem Ltd (051910.KS) has entered a partnership with China’s Huayou Group’s subsidiary Youshan, it said on Sunday, to build a joint electric vehicle (EV) battery material plant in Morocco to diversify its portfolio.
Huayou has joined the growing number of Chinese electric vehicle and battery companies seeking to expand overseas to get closer to their foreign clients and benefit from local incentives.
In a separate statement, Huayou’s listed unit Zhejiang Huayou Cobalt Co (603799.SS) said it intended to build plants with LG Chem in Indonesia and Morocco under a strategic partnership to promote international growth.
The Morocco plant, set to start production in 2026, aims to produce 50,000 tonnes of lithium-phosphate-iron (LFP) cathode materials annually, enough to be installed in 500,000 entry-class EVs, the South Korean chemical maker said in a statement.
LG Chem, known for manufacturing more expensive nickel-cobalt-manganese (NCM) cathodes, is entering the LFP cathode business to meet growing demand for cheaper LFP batteries as the auto industry seeks to produce more affordable EVs, whose most expensive components are the batteries.
LG Chem said LFP cathodes produced at the Morocco plant will be supplied to the North American market and could be eligible to receive subsidies from the U.S. Inflation Reduction Act (IRA) as Morocco is a free-trade partner with the United States.
The IRA is designed to wean the United States off the Chinese supply chain for EVs.
It requires at least 40% of the value of critical minerals used in an auto battery to be sourced from the United States or a free trade partner to qualify for a $3,750 tax credit per vehicle. South Korea has a free-trade agreement with the United States.
LG Chem and Youshan would need to adjust their respective equity share in compliance with the U.S. Treasury Department’s guideline of a “foreign entity of concern,” a provision aimed at China, LG Chem said in the statement.
The U.S. Treasury Department has not yet provided a precise definition of “foreign entity of concern” and how it would be applied.
LG Chem also announced an additional investment plan with Huayou Cobalt to build a lithium conversion plant in Morocco, with the aim of starting mass production by 2025 with an annual capacity of 52,000 tonnes of lithium.
In addition, LG Chem said it plans to build two other facilities in Indonesia – a precursor plant with an annual production capacity of 50,000 tonnes and a plant to extract mixed hydroxide from nickel ore for precursor production.
The size of LG Chem’s investments for its four facilities with Huayou Group has not been finalised.