Tesla is a key customer of EV battery maker LG Energy Solution. Image: Tesla

LG Chem, the parent company of electric vehicle (EV) battery maker LG Energy Solution, said on Tuesday that it will spend$3.2 billion to build a cathode manufacturing plant in Tennessee.

The plant at Clarksville is aimed to have, by 2027, a yearly output of 120,000 tones of cathode, arguably the most important material used in the production of an EV battery that determines its performance and cost.

LG Chem said the new plant will be the largest of its kind in the US, taking up 420 acres of space. Construction will start early next year with mass production slated to begin in 2025.

Tennessee was the best choice due to its proximity to key customers, the company said. Though LG Chem didn't officially say so, it is likely building the plant to service its subsidiary LG Energy Solution.

Tennessee is where Ultium Cells, the battery joint venture between LG Energy Solution and General Motors, is building its EV battery manufacturing plant in Spring Hill. The venture is also building an EV battery manufacturing plant in Lordstown, Ohio.

LG Energy Solution also announced in August that it will form a joint venture with Honda to build an EV battery manufacturing plant in the US. The pair are planning to spend$4.4 billion on the project.

The pandemic has increased worries over potential supply chain disruption while the prices of raw material such as nickel used in EV batteries has gone up in recent years. The US has also announced various policies to build its own supply chain locally for products such as chips and batteries. Compatriot EV battery maker SK Innovation is also building a battery manufacturing plant in Tennessee with Ford. It is also planning to build a plant on its own in Georgia.

The Tennessee facility will allow LG Chem to proactively address the changing dynamics of the global battery material market and with legislation such as the Inflation Reduction Act, the South Korean chemical giant said. The plant will manufacture advanced NCMA cathode materials the company said. NCMA means the cathode is comprised of nickel, cobalt, and manganese as well as aluminum.

Cathode makers like LG Chem are attempting to increase the amount of nickel used to increase the energy density of EV batteries. LG Energy Solution is the world's second-largest EV battery maker after China's CATL and supplies batteries to US car makers Tesla and General Motors and other auto giants.

In May, LG Energy Solution also announced that it will spend$4.1 billion with car maker Stellantis to build a battery manufacturing plant in Ontario, Canada.

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