Despite its misgivings, Toyota is investing $5.6 billion to build batteries for electric vehicles

Toyota’s statement on the new battery plant investment indicated that it is still looking for ways to meet stricter emissions rules, regardless of battery-only EVs.

“Toyota believes that there is more than one way to achieve carbon neutrality. It also believes that the means to reduce CO2 emissions as much and as quickly as possible, while protecting the livelihoods of customers, will vary widely from country to region,” Toyota said in a statement. “With this in mind, Toyota will continue to do everything possible to flexibly meet the needs of its customers in all countries and regions by offering multiple powertrains and offering as many options as possible.”

Unlike battery-powered electric cars, which can be charged at home or at an increasing number of public charging stations, fuel cell vehicles require an entirely new refueling infrastructure to allow them to be filled with hydrogen. And those fulfillment options are still very limited, especially outside of California.
Toyota’s only pure battery-powered EV in North America is the BZ4X SUV, which went on sale earlier this year. But Toyota recently had to stop driving the cars to a handful of its early buyers due to the risk of the wheels falling off. The company has yet to figure out a way to fix the problem and is therefore forced to offer to buy back the vehicles from buyers.

About half of the money Toyota plans to spend on electric vehicle battery production will go toward an expansion of the Liberty, Ill., plant already under construction. The investment will increase the plant’s price tag from $1.3 billion to $3.8 billion.

The influx of cash will also increase the number of jobs at the plant, which will start production in 2025, by as many as 2,100. Toyota said the plant will produce batteries for both pure battery-powered EVs and plug-in hybrid vehicles with both electric and internal combustion engines.

It is important for Toyota to increase some of the battery capacity of its US-made electric vehicles. Recently passed legislation to increase tax credits for electric vehicle buyers includes restrictions based on battery manufacturing. This requirement requires that 50% of battery components be manufactured or assembled in North America beginning in 2023 and 60% in 2024 and 2025 for a vehicle to be eligible for the tax credit. This number will gradually increase to 100% in 2029. So shipping batteries from Asia to US assembly plants could deprive potential car buyers of thousands of dollars in tax breaks.

EV battery tank

Automakers have rushed to announce EV battery factory plans in recent months, often with various partners. Just this week, Honda (HMC) announced a $4.4 billion joint investment with LG in a new US battery plant.
In addition, Hyundai announced in May that it is building a battery plant in Georgia. Ford announced last year that it would invest $11.4 billion with LG rival SK Innovations to build three battery plants along with an electric vehicle assembly plant.
Mercedes-Benz opened a battery plant in Alabama earlier this year. Stellantis, which was created by the merger of Fiat Chrysler and French carmaker PSA Group, announced plans for a battery factory last year with LG.

And GM and LG have built plants in Ohio, Tennessee and Michigan for a combined $7.2 billion and are planning a fourth plant in Indiana. Plants in Tennessee and Michigan are under construction, while the Ohio plant recently began production.

— CNN Business’ Matt McFarland and Peter Valdes-Dapena contributed to this report.