US Department of Energy Loaning GM $2.5B for New EV Battery Plants
GM and LG will invest an additional $7 billion in the battery-manufacturing joint venture.
The Department of Energy is set to loan GM and LG $2.5 billion to finance production facilities for lithium batteries, reports Reuters.
The loan will be made to Ultium Cells LLC, a joint venture between LG and GM to produce cells for electric vehicles. It's intended to finance facilities in Ohio, Tennessee, and Michigan. The loan is a part of the Advanced Technology Vehicles Manufacturing (ATVM) program and is expected to be formally closed in the next few months.
Notably, it's set to be the first new loan funded under the ATVM since 2010. It's also the first time the Department of Energy has funded a project solely concerning battery cell manufacturing as a part of the vehicle-oriented scheme. Previously, the ATVM program has financed loans to Ford, Nissan, and Tesla, including some funding for battery manufacturing activities.
It comes against a backdrop of President Biden's push to boost EV production in the U.S. The target is for plug-in hybrid or fully-electric vehicles to make up 50% of US auto production by 2030. To build more EVs, you need more batteries, and GM's efforts are well aligned with these goals.
In addition to the government loan, GM and LG intend to invest $7 billion into the three new battery plants. Production is set to kick off at the Ohio plant in August. The Tennessee plant is set to follow in late 2023, and Michigan in 2024.
The expectation from the Ultium partnership is that the venture will produce 5,000 new jobs. 700 workers are already employed at the Ohio facility. As per the loan agreement, workers at the new facilities must be paid at the prevailing local rate, including usual fringe benefits.
The Department of Energy is exploring other loans in the same space, too. Jigar Shah, who directs the department's loan office, told Reuters that they had received $18 billion in requests as part of the automotive loan scheme, with a further $5 billion expected to be on the way. Shah expects to see more loans issued, with the program authorized for $17.7 billion in funding at present.
There's no way around the fact that battery production will have to increase markedly as demand for EVs steps up. Government funding should help to speed the process of getting new battery lines up and running. As a bonus, it should help build a groundswell of new high-tech manufacturing on U.S. soil, supporting industry through the EV transition to come.
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