Advanced automotive battery suppliers are considering a pair of West Michigan cities for new or expanded manufacturing facilities, MiBiz has learned.
LG Energy Solution Michigan Inc. has secured $1.36 billion in financing to support battery manufacturing expansions in North America, at least some of which will happen in Holland, the Detroit News reported last week.
Meanwhile, officials with Jackson-based utility Consumers Energy confirmed to MiBiz that the company is in discussions with state and local economic development agencies about an as-yet undisclosed project considering a site in Big Rapids.
Consumers Energy Senior Vice President and Chief Customer Officer Brian Rich confirmed that Big Rapids is among several Michigan cities where the utility is aware of potential battery manufacturing projects, and that at least one project is under consideration.
“These projects are all confidential, and we’re under an NDA with the state. Big Rapids is part of our service territory, and in that particular proposal we’re working with the MEDC and The Right Place on a response,” Rich said.
Sources noted Big Rapids’ location on the U.S. 131 corridor and the presence of Ferris State University, which has strong engineering and manufacturing technology programs, as potential draws for the company.
The utility disclosed to state regulators last month that it’s aware of 10 “active electric vehicle supply chain and other high-tech projects” being considered in Michigan that represent roughly $64.8 billion in potential investments and about 21,000 jobs. Consumers and DTE Energy, the state’s two largest investor-owned utilities, are seeking expedited approval of special electric rates to lure these types of battery manufacturing plants (see page 18).
Holland poised for investment
While LG Energy Solution, utility and state and regional economic development leaders remain tight-lipped about a local expansion, signs point to growth at LG’s existing Holland facility.
In regulatory filings in South Korea, LG Energy Solution Michigan disclosed that it was approved for $1.36 billion in financing through a capital raise that will be issued incrementally through 2024.
“Through the capital increase, we plan to use it as an investment fund to respond to the increase in demand for electric vehicle batteries and (energy storage systems) in the North American market. We plan to invest billions of dollars,” according to the filing.
Parent company LG Corp. plans to invest $4.5 billion through 2025 to increase production capacity in North America by up to 70 gigawatt hours while creating roughly 10,000 jobs in the process as part of its Project Green Field initiative.
A Forbes report from March of this year stated that, as part of Project Green Field, LG Energy Solution would add new facilities to its existing Holland site that are expected to be operational by 2023.
The company reportedly confirmed last week that a portion of the investment will go toward expanding its Holland facility. The spotlight now shines on a 40-acre parcel of land that LG owns adjacent to its existing manufacturing facility.
A comment from LG Energy Solution was unavailable by press time.
Jennifer Owens, president of economic development firm Lakeshore Advantage Corp., said she could neither confirm nor deny whether her organization — which serves both Allegan and Ottawa counties — was helping to facilitate an expansion project at LG’s Holland facility. A spokesperson for the Holland Board of Public Works issued a similar statement.
Owens did say that the company has found a suitable home in Holland.
“LG Chem is an important employer in our region,” Owens told MiBiz via email. “They have consistently exceeded their job creation and investment commitments on past expansion projects.”
“We are very grateful to have such an important facility focused on the future of the automotive industry in our region,” she added. “Our community will do all we can to welcome and support their continued growth and investment.”
LG originally announced its $303 million, 650,000-square-foot facility in Holland in 2010. The company was drawn to Holland’s favorable electrical power rates, a highly skilled workforce, and relative proximity to customer General Motors. The company ramped up production in 2012.
The Michigan Economic Development Corp. was unable to offer any information about a potential LG expansion in Michigan, but a spokesperson told MiBiz in a statement: “We are proud to remain a global home for opportunity within the future of mobility and electrification. Michigan has a longstanding and strong relationship with LG Energy Solution, and we remain grateful for the company’s decade-long investment in both manufacturing and R&D in the state.”
Looking for a win
Randy Thelen, president and CEO of regional economic development organization The Right Place Inc., noted that major automakers in Michigan are planning about $150 billion in electric vehicle and battery investments in the coming years.
“That’s a nearly unprecedented level of investment for that industry,” Thelen said. (The Right Place does not confirm whether potential projects are under negotiation, Thelen said in reference to Big Rapids.) “Inflation adjusted, it’s probably the biggest that’s occurred since the start of the industry 100 years ago. There’s a massive amount of capital being deployed. Certainly, West Michigan has a lot to offer.”
Thelen would know: He led the team at Lakeshore Advantage that mobilized in 2009 to lure in the LG Chem plant and also secured a $175 million investment in Holland from Johnson Controls Inc. to launch lithium-ion battery manufacturing, a business that was later spun off as Clarios.
Both projects were also backed by hundreds of millions of dollars in federal and state incentives aimed at growing the advanced battery industry, a move maligned by some critics given that electric vehicles made up only a fraction of the industry at the time and amid concerns the sector was already overcapacity.
While electrified vehicles currently represent a tiny portion of yearly new vehicle sales, their trajectory and automakers’ planned investments make clear that EVs are the future of the industry.
According to IHS Markit, EVs accounted for 3 percent of light vehicle production in North America during 2020, compared to 43 percent that were powered by internal combustion engines and another 47 percent that were some form of hybrid. This percentage of EV production is forecasted to steadily climb to 16 percent by 2025 and 36 percent by 2030.
This summer, President Biden implored automakers to position themselves to make EVs at least half of all new vehicle sales by 2030. While the goal might be a lofty one, Ford, GM and Stellantis have all announced that they are striving to make EVs account for 40 to 50 percent of U.S. sales by 2030.
Electric vehicles accounted for a record-high 1.8 percent of registrations in the U.S. in 2020, according to IHS Markit. Forecasts put that number at 3.5 percent in 2021 and more than 10 percent by 2025.
Indeed, the state continues to jockey for position to retain, expand and lure new projects that supply the emerging electric vehicle market.
Michigan experienced what economic developers described as a major setback this fall when Ford, along with partner SK Innovation Co., announced it would invest $11.4 billion and create 11,000 jobs in Tennessee and Kentucky to build facilities that manufacture both electric vehicles and batteries.
The loss prompted vocal concern from economic development organizations statewide, which immediately focused on initiatives to create large, shovel-ready sites and additional incentives to court these large projects.
“(Michigan) is not going to be the de-facto investment destination — it’s just not going to happen,” said Mike Wall, director of automotive analysis at IHS Markit. “We’ve seen that time and time again with some of the investment decisions that have been made. That’s not to detract from regional investment organizations and so forth that have been trying to lure these investments. It’s just a competitive environment.”
With the electrification of vehicles steadily accelerating, it creates a sense of urgency to bring key suppliers for that space to Michigan.
“Look at all the engines and transmission plants (in Michigan),” Wall said. “That’s a lot of people and labor. It’s not going to go away overnight, but it will be at risk at a much more rapid clip, and we want to have jobs for those folks. We want to be able to attract investment.”