LG Energy Solution, based in South Korea, has entered into an agreement to supply lithium-ion batteries for electric vehicles (EVs) to Toyota, the world’s largest automaker. These batteries will be used in EVs assembled in the United States, as announced by the companies on Wednesday.

This partnership will support Toyota’s growing lineup of battery EVs, which will include a new model scheduled to be manufactured at a Kentucky-based production facility, the company’s largest globally, starting in 2025.

LG Energy Solution CEO Youngsoo Kwon expressed his enthusiasm for the collaboration, stating, “The one thing I wanted to change was the fact that we don’t have any business with the number one player Toyota.” Kwon went on to highlight that LG Energy Solution now serves nine of the top 10 automakers globally. The company is set to supply Toyota with 20 gigawatts of batteries annually starting in 2025.

Toyota has held the title of the world’s best-selling automaker for three consecutive years, with sales of nearly 10.5 million vehicles in 2022. Following the announcement, Toyota’s Tokyo-listed shares saw a 2.91% increase in morning trading.

LG Energy Solution also provides batteries to other automotive giants, including General Motors in the United States, Hyundai in South Korea, and Honda in Japan. Less than five months ago, the company announced plans to construct a $4.3 billion EV battery plant in the United States in collaboration with Hyundai to take advantage of tax credits available to buyers of U.S.-made vehicles, which can be as much as $7,500 under the Inflation Reduction Act.

LG Energy Solution is committed to investing approximately 4 trillion Korean won ($3 billion) to establish new production lines exclusively for Toyota, with completion expected by 2025. Toyota aims to offer 30 battery-electric vehicle models under its Toyota and Lexus brands and produce up to 3.5 million BEVs annually by 2030.

In the competitive EV battery market, LG Energy Solution is currently the world’s third-largest producer, following Chinese EV company BYD. Chinese firms dominate the sector, particularly CATL, which held 36.6% of the global EV battery market from January to July of the current year.

Kwon emphasized that the competition primarily involves Chinese and Korean companies, with Japanese firm Panasonic also in the mix. However, he noted that it’s too early to fully assess the capabilities of Chinese battery makers and emphasized the importance of global operations in this industry. Kwon highlighted that keeping production within China is more straightforward, but in a global business, success depends on the ability to manage operations worldwide.