Toyota Buys Stake in LG-Huayou Battery Venture to Meet IRA Compliance

Toyota’s Stake in LG-Huayou Venture Secures Cathode Material Access

Toyota Tsusho, the trading arm of Japan’s Toyota Group, acquired a 25% stake in a cathode material joint venture. This venture is between China’s Huayou Cobalt and South Korea’s LG Chem. The $1.21 billion deal changes ownership of the 66,000 t/yr CAM plant in Gumi, South Korea. Huayou reduces its stake from 49% to 24%, while LG Chem keeps 51%.

This strategic move ensures the venture meets the Inflation Reduction Act (IRA) rules. It lowers Huayou’s share below the 25% limit for Prohibited Foreign Entities (PFEs). With Toyota Tsusho involved, the Gumi plant now qualifies for IRA tax credits. These credits are vital to supply cathode active materials (CAM) to North American battery makers.

LG Chem confirmed Toyota Tsusho will supply part of the plant’s output to battery customers across North America. This fits Toyota’s broader effort to localize its EV supply chain. It also secures access to critical materials amid changing geopolitical trade rules.

Inflation Reduction Act and OBBBA Drive Strategic Ownership Shift

The recent stake acquisition is a direct response to tightening US and EU trade regulations. LG Chem cited the One Big Beautiful Bill Act (OBBBA) introduced by President Trump, which expanded restrictions around foreign entities of concern. Similarly, the EU’s Critical Raw Materials Act (CRMA) limits excessive dependence on a single foreign source for key materials.

Toyota’s deal comes amid growing pressure on automakers to build transparent, compliant, and secure battery material supply chains. The IRA offers major tax incentives for clean energy investments, but penalizes sourcing from non-compliant foreign entities. With Huayou’s ownership trimmed, the Gumi plant avoids disqualification from these benefits.

Beyond this move, Toyota Tsusho and LG Energy Solution have also agreed to build a 13,500 t/yr battery recycling facility in the US. Slated for launch in 2026, the plant will process battery scrap, reinforcing Toyota’s closed-loop battery strategy.

SuperMetalPrice Commentary:

Toyota’s investment in the LG-Huayou battery venture marks a key pivot in the global battery supply chain. By proactively adjusting ownership structures, Toyota ensures its North American EV ambitions remain aligned with US legislation. The inclusion of CAM in IRA-compliant channels reflects how policy is reshaping upstream supply decisions. As governments tighten control over critical materials, expect more strategic M&A and ownership restructures aimed at IRA and CRMA compliance. For metal traders and CAM producers, the Gumi plant’s output could serve as a benchmark for IRA-aligned cathode material pricing and sourcing trends.