EV battery maker LG Energy Solution eyes Michigan tax break for $3B expansion

• A new deal with Toyota will lead LG Energy Solution to invest $3 billion at its EV battery campus in Holland
• The project will follow an earlier expansion worth $1.7 billion that is in progress
• The state is offering about $600 million in tax breaks toward the project

Michigan is offering $594 million in tax breaks to a global electric vehicle battery maker as the company plans its second large-scale expansion in west Michigan.

LG Energy Solution is completing construction on its $1.7 billion factory in Holland, adding 1.4 million square feet to its campus and expecting to double its 1,200 employees in the city when the facility opens in 2025. 

Now, another expansion appears imminent, with $3 billion in development proposed there as the South Korean company eyes nearby property in anticipation of still more construction.

Related:

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The latest plans stem from Toyota’s announcement Wednesday that the EV battery maker will make an estimated 200,000 lithium ion units for vehicles made in the Japanese automaker’s North American production facilities.

Those batteries, Toyota said, will be manufactured in Holland.

“The plans certainly are potentially very exciting,” Holland City Manager Keith Van Beek told Bridge Michigan on Thursday. 

However, Van Beek added, “those are all contingent on many layers of local approval, which are not presumed and certainly are not in place yet.”

So far, LG Energy Systems (LGES) has not submitted site plans for city zoning and planning approvals, Van Beek said.  Until then, no details are available from the city on the building plans. LGES did not respond to a Bridge request to comment.

City approval also is required for a 12-year property tax abatement, Van Beek said, which would combine with state tax breaks —  like waiving sales and use tax and the elimination of personal property tax —  to total $594 million in tax savings. 

The Holland campus is home to LG Energy’s first US battery facility, opening in 2009. Since then, LG Energy has developed its own batteries and formed several joint ventures with automakers, including Ultium Cells production with General Motors Corp., along with Honda and Hyundai. 

The battery maker announced its first expansion in Holland in early 2022, when the Michigan Strategic Fund (MSF), the public funding arm of the Michigan Economic Development Corp., approved $189 million in incentives for the LG expansion.

Full incentives on that project came to $525 million. 

Since then, construction delays and a tight hiring market pushed back on its goals to start production in 2025. The state earlier this year gave LG Energy until 2027 to reach its 1,200-person hiring goal. 

Holland officials have been open to LG’s expansion plans, Van Beek said. 

However, the city will have to evaluate their impact on Holland’s utility service, particularly electricity and water availability due to battery makers’ high needs for both. 

“We also have a very low unemployment rate here and a lot of competition for jobs,” Van Beek said. “And, by extension, … we have some housing concerns. “

Unclear is whether the recent expansion announcement will result in job gains. 

“As we understand it, this is a low-job project,” Van Beek said. 

The unemployment rate in the Holland area is about 3.3 percent, compared to 3.6 percent statewide. 

Average pay for the new positions for the expansion in progress will be $65,364, the company said in 2022. That is about 72 percent of the $90,000 median wage in Ottawa County and 83 percent of the $78,000 median wage in Allegan County. Holland is in both counties.

Jennifer Owens, president of regional economic development group Lakeshore Advantage, did not respond to questions from Bridge, including what the expansion plans mean for local hiring or to confirm the state subsidy plan. MEDC officials were also unavailable Thursday to address whether other incentives could be added to the package.

However, Owens addressed the increasingly important role of EV battery manufacturing in Michigan, as the state continues to seek the multi-billion dollar investments amid the auto industry’s transition to electric vehicles. 

“The investment is an economic boost in the long-term with implications for the future landscape of the advanced energy storage supply chain,” Owens told Bridge Michigan. “The car battery is the new engine. Having key components of electric vehicles manufactured here will ensure this region’s manufacturing economy continues to thrive.”

Besides LG Energy Solution, other Michigan EV battery sites in development Gotion Inc.’s battery pack factory in Big Rapids; Ford Motor Co.’s subsidiary BlueOval Battery Park in Marshall, which was just put on hold by the automaker; Our Next Energy in Van Buren Township; and Ultium Cells next to the GM Delta Township Assembly plant near Lansing.