LG Energy Solution, the world’s third-largest electric vehicle battery maker, announced its plans to enhancement investment to $5.5 billion for building an EV battery factory at Queen Creek in Arizona.

This move revives a project that was put on hold last year due to unfavorable economic conditions. The new electric vehicle battery factory will consist of two manufacturing facilities for cylindrical batteries for electric vehicles and lithium iron phosphate pouch-type batteries for energy storage systems.

The decision to increase investment in cylindrical EV battery production in North America was made due to rising demand from EV makers for locally manufactured high-quality, high-performance batteries in an effort to satisfy the Inflation Reduction Act’s (IRA) EV tax credits.

The complex will include two separate facilities, one for cylindrical batteries for electric vehicles (EVs) and another for lithium iron phosphate (LFP) pouch-type batteries for energy storage systems (ESS).

Last year, LG Energy Solution announced an investment of KRW 1.7 trillion to manufacture cylindrical EV batteries in the same location, making this new investment more than four times the original amount.

The new facilities aim to produce 27GWh of cylindrical batteries for EVs and 16GWh of LFP pouch-type batteries for ESS, with a total annual production capacity of 43GWh.

Of the KRW 7.2 trillion investment, KRW 4.2 trillion ($3.2 billion) will be used to build the cylindrical battery manufacturing facility with a capacity of 27GWh, while KRW 3 trillion ($2.3 billion) will be used for the LFP pouch-type battery facility with the capacity of 16GWh. The cylindrical battery manufacturing facility aims to produce 2170 cells for EV makers in North America, starting in 2025.

It will be the first-ever U.S. cylindrical battery manufacturing facility solely invested in by a Korean battery manufacturer. The LFP pouch-type battery manufacturing facility is also set to be the first ESS-exclusive battery production facility in the world, with production scheduled to begin in 2026.

Automakers and EV battery producers are competing to establish manufacturing facilities in the United States to take advantage of federal subsidies that could generate up to $45 per kilowatt hour (kWh) to offset production costs.

LG Energy Solution, which already supplies batteries to Tesla, Lucid Group, General Motors, and other automakers, had initially put the plan on hold due to unprecedented economic conditions.

In January, LG Energy Solution revealed that it had been in discussions with Tesla and other electric vehicle startups to supply batteries from the proposed factory.

Apart from the new Arizona factory, LG Energy Solution has production sites in South Korea, China, Poland, Canada, and Indonesia.