Biden’s Climate Bill Is Accelerating the Pace of Electric Vehicle Makers Relocating to North America

EV makers and their battery suppliers are signing multibillion-dollar deals to build new factories in the U.S. and Canada in order to qualify for EV tax credits under the IRA.

Tesla is reportedly considering opening a Gigafactory in Canada. (Photo By Michael Macor/The San Francisco Chronicle via Getty Images)

It’s not even been two weeks since the Inflation Reduction Act took effect on Aug. 16,  the world’s largest automakers are already signing multibillion-dollar deals to set up battery supply chains in the U.S. and Canada in order to qualify their electric vehicles for federal tax credits.

Japan’s Honda Motor and Korea’s LG Energy Solution, a major supplier of EV batteries, today (Aug. 29) announced a plan to build a $4.4 billion battery factory in the U.S. The exact location wasn’t disclosed, but the Wall Street Journal reported it will be somewhere in Ohio.

The plant, expected to begin operation by the end of 2025, will supply batteries exclusively to Honda electric vehicles made in North America, the companies said.

The deal is the latest of a string of partnerships between automakers and battery manufacturers seeking to relocate their EV supply chain to North America—a trend that had begun before the U.S. government modified tax incentive rules on EV purchase as raw material costs surge and geopolitical tensions increase the risk for automakers.

Under the IRA, to qualify for federal tax credits of up to $7,500, EVs sold in the U.S. in 2023 or later need to have at least half of their battery components produced in North America and 40 percent of battery raw materials processed in the U.S. or trade-friendly country. The minimum percentages required will increase each year through 2028 until reaching 80 percent for battery raw materials and 100 percent for components.

Automakers that have announced battery deals since IRA:

  • Honda and LG Energy announced a partnership on Aug. 29 to build a $4.4 billion EV battery factory in the U.S.
  • Volkswagen and Mercedes on Aug. 23 signed a memorandum of understanding with the Canadian government to cooperate on the development of EV batteries.
  • Panasonic is in discussion to build a $4 billion EV battery plant in Oklahoma, the Wall Street Journal reported on Aug. 26. The Japanese company, which supplies batteries to Tesla, announced in July it’s building a similar-sized factory in Kansas.
  • Tesla is reportedly considering opening a Gigafactory in Canada. CEO Elon Musk hinted at the plan during a company meeting in June.

Deals struck before the IRA took effect:

  • General Motors and LG Energy in January announced a partnership to build a $2.6 billion battery plant in Michigan.
  • Stellantis, the parent company of Chrysler, said in May it’s teaming up with Samsung SDI, the EV battery division of Korea’s Samsung Electronics Group, to build a $2.5 billion battery plant in Indiana.
Biden’s Climate Bill Is Accelerating the Pace of Electric Vehicle Makers Relocating to North America