Honda Is The Latest Car Maker To Plan A Big U.S. Battery Plant—Just In Time For New EV Tax Credit

Honda Motor Co., which doesn’t sell any autos in the U.S. powered solely by batteries, is accelerating plans for that burgeoning market segment with a $4.4 billion U.S. factory it will jointly operate with LG Energy Solution. The location of the factory would ensure its future electric vehicles can qualify for a revised federal tax credit.

The carmaker said in Tokyo on Monday it’s forming a joint venture with LG for a facility that will produce 40 gigawatt-hours of lithium-ion batteries annually when it opens in 2025, with construction to start next year. The Wall Street Journal reported the new factory will be in Ohio, home to Honda’s main North American production and engineering operations, citing people familiar with the matter. Honda spokesman Marcos Frommer declined to confirm that.

The news comes on the heels of this month’s passage of the Inflation Reduction Act, which includes a new $7,500 federal tax credit for consumers to buy EVs. But unlike a previous version of the credit, qualified vehicles must be built in North America and 50% of key battery components, such as cathodes and anodes, also need to be made in North America. To get the full credit, at least 40% of critical battery materials have to be mined or refined in the U.S. or countries with which it has free trade agreements, or the materials have to be recycled at North American facilities.

Honda’s talks with LG predate the U.S. tax credit rule, Frommer said. A project of this type would have taken months of preparation, says Sam Abuelsamid, an automotive technology analyst for Guidehouse and former Ford engineer who is a senior contributor to Forbes.

“Something like this doesn’t happen overnight,” Abuelsamid. “If you look at the overall industry trend, over the last couple of years, the whole industry has been moving toward localizing production of batteries.”

The U.S. is seeing the creation of an entirely new production base to support electric vehicles. In the past year, General Motors, which Honda also has a battery partnership with, Ford, Volkswagen, Hyundai, Toyota, Panasonic, Redwood Materials and Sila have announced tens of billions of dollars worth of plans to build battery factories and battery component facilities, few of which currently exist in the region. Up to this point, Elon Musk’s Tesla has been the only high-volume carmaker with its own dedicated battery manufacturing operations in the U.S.

Tesla’s competitors have relied on South Korea and China for batteries and materials, though U.S. trade tension with China as well as concern about global supply chains makes that increasingly challenging.

“As the number of EV nameplates that are planned to be produced increased dramatically, it now makes more sense to localize that production,” Abuelsamid said. “Batteries are big, they’re heavy, they’re bulky, [it costs] a lot of money to transport them and it’s challenging to transport them from a safety perspective.”

Honda has said its first dedicated EV, the Prologue SUV, will arrive in 2024. The company also is readying the ZDX, an electric SUV for its premium Acura line for 2024.