Provisions in the Inflation Reduction Act may have influenced Honda’s decision to build a battery plant in the U.S.
Yesterday, Japanese car maker Honda announced a joint venture with Korean LG Energy Solutions to build a $4.4-billion battery plant in the U.S.
The plant will produce the batteries needed for Honda’s electric vehicles (EVs). Though the location of the plant is still being decided, construction is expected to start in 2023 and the plant should be fully operational by 2025, the company says.
The timing of the automaker’s decision may have been influenced by the Inflation Reduction Act (IRA).
The IRA includes a variety of incentives encouraging Americans to make the transition to renewable sources like solar power and EVs.
In addition to tax credits for EV buyers, the bill gives tax credits to manufacturers that produce batteries state-side—$35 per kilowatt hour. When completed, Honda’s new plant will produce 40 gigawatt hours annually, leading to approximately $1.4 billion in tax credits each year, Yahoo Finance reports.
Why it’s news
Honda’s decision to manufacture batteries in the U.S. isn’t shocking—it already has manufacturing facilities in Ohio.
The tax incentive is a big draw for battery manufacturers. With more car companies switching their focus to EVs, the demand for batteries will increase.
Honda isn’t the only car company bringing battery plants to the U.S. Ford is planning several facilities in Kentucky. The plants will produce somewhere around 86 gigawatt hours a year by 2025, totally close to $3 billion in tax credits annually.
The battery manufacturer for Tesla, Panasonic, is looking to invest around $4 billion in a plant in the U.S. Other Korean battery manufacturers are also looking to establish several battery plants for General Motors, Stellantis, and Ford, Bloomberg reports.
California has plans to only sell EVs by 2035, a decision that could influence a number of other states. Europe and some parts of China have similar plans with a goal to primarily use EVs by 2030.
With such a swift push toward EVs, batteries are going to be in increasingly high demand. The IRA will influence much of that manufacturing to take place in the U.S.