LG Energy seeks to tap Michigan’s $1B incentive fund for Holland expansion

A South Korean electric vehicle battery manufacturer wants to expand its existing facility in west Michigan, investing $1.5 billion and adding 1,000 jobs as it seeks to boost production by 2025.

LG Energy Solution wants the city of Holland to approve a 20-year, tax-free renaissance zone for the project, marking one of the earliest public requests for incentives since the state approved the $1 billion SOAR fund in December.

The move by the company seeking to be the largest EV battery supplier in the United States will be key for the region that is trying to grow its automotive manufacturing base, business leaders said. 

Related: 

• Study shows Michigan's economy still struggles to compete with other states
• Michigan awaits ‘new era’ of economic development as $1B fund takes shape
• West Michigan reverses Chicago exodus, gaining residents as state stagnates

“An international leader in advanced energy storage considering our region for a transformational expansion project like this is truly extraordinary,” said Jennifer Owens, president of Lakeshore Advantage economic development group, in a statement.

Company officials told Gov. Gretchen Whitmer in a Dec. 2 letter that they’ll consider the project an “incubating hub” to attract staff that develops lithium-ion batteries. 

According to the city, the total package of incentives requested is $525 million. The state is offering a workforce housing loan program valued at $10 million to support affordable housing, according to a briefing memo from the city.

The request by LG for incentives comes as Michigan is racing to land EV battery production.  Automakers and suppliers say they will be spending billions on the large-scale facilities over the next few years as the industry shifts from combustible engines to electric vehicles.

At stake are Investment in the billions, jobs in the tens of thousands and a foothold on the auto industry’s mechanical future.

LG Energy Solution, which employs 20,000 worldwide and supplies batteries to Ford, GM, Chrysler and Tesla, approved spending $1.36 billion on the facility in November, but did not disclose a planned location. 

However, its request to establish a renaissance zone on property that it owns adjacent to its existing 10-year-old facility in Holland, brought the move into the public realm. The existing property has three more years under tax-free (except for debt millage) renaissance zone status, according to the city. 

The Holland City Council on Wednesday voted to discuss the proposal at a meeting on Jan. 29, then will vote on the tax incentive on Feb. 2. If approved, it then goes to the Michigan Strategic Fund for further approvals.

“They are very eager to get started on construction,” Holland City Manager Keith Van Beek said. “... There absolutely is a sense of urgency from the company and the state to get these approvals in place.”

The company plans to build at least 1 million square feet to house the new production. It also will require an estimated 40 percent increase in energy supply, and the Holland Board of Public Works will build a new $10 million substation to accommodate it.

At least 13 new U.S. battery plants had been announced as of last fall by vehicle manufacturers, according to a count by Automotive News. Among them are three partnerships between LG Energy Solution and General Motors, which is considering a site in Delta Township west of Lansing for battery production, as well as expansion to its facility in Orion Township, north of Detroit. Both of the GM projects also seek state tax incentives. 

Among that list of 13, nine will be built in southern states — including sites in Kentucky and Tennessee, chosen by Ford Motor Co. — and four remain undetermined. At the same time, several EV startups and suppliers also are shopping for sites for the major developments. 

While expressing caution that the expansion “is not a done deal,” Van Beek also said the investment and potential job creation are significant for the city and region. LG already employs hundreds there in its plant in Allegan County on the Ottawa County border. 

“This is the exclamation point on a lot of fantastic development, investment and job expansion in Holland,” he told Bridge.

The LG expansion would resonate across the region and state, said Andy Johnston, vice president of government affairs for the Grand Rapids Area Chamber of Commerce. 

“Having a strong automotive manufacturing sector here in west Michigan is obviously going to be critical for our future,” Johnston said. 

The region is home to many automotive suppliers, including Lacks Industries, based in Grand Rapids. Strengthening its foothold in the electric vehicle battery manufacturing industry would boost the region for years, Johnston said, since automakers are accelerating their goals to cut production of internal-combustion engines by 50 percent by 2030 or sooner, and replace them with EV production.

Unemployment in Allegan County in November was 3.6 percent, which tied it for seventh-lowest in the state. Ottawa County's unemployment at that time was 3.2 percent, the third lowest in the state. 

That could bring more hiring challenges to the region if the LG plan is approved, Van Beek said. 

“Manufacturers are struggling to get people to work right now,” he said. “We know we have our work in front of us … should it move forward.”

However, the scale of the work and the expected pay rates — which haven’t been disclosed, but must be above the regional average to qualify for incentives — will make the expansion worth it, Van Beek and Johnston said. 

The housing fund tied to the LG proposal would help the region as more workers come to the region for the factory, they said. 

“These are the problems we want to have to deal with,” Johnston said. “That’s why we’re so focused on anything we can do to address the barriers to solving the talent shortages.”

Editor's note: This story was updated at 11:30 a.m. Jan. 24 to reflect that the plant is located in the Allegan County portion of Holland.