A Japanese automotive powerhouse just took a major step toward securing a piece of the U.S. electric vehicle (EV) market. Toyota (NYSE:TM) has a long history of producing reasonably priced, mid-range cars.
Despite its status as a pioneer in the hybrid vehicle industry, speculation has risen that the company isn’t adapting well to an EV-centric industry. However, Toyota has responded by making a notable effort to corner a lucrative section of this booming market. It recently announced a partnership with LG Energy Solution. The South Korea-based battery maker will support its EV expansion efforts by supplying lithium-ion batteries.
If it can successfully scale U.S. operations, Toyota will be a name to watch among EV stocks as it gears up to challenge domestic automakers. Does that mean that other EV producers should be worried about Toyota’s expansion efforts? Let’s dive into this news and take a closer look at what it may mean for investors and consumers.
Lists of Winning EV Stocks Should Include Toyota
News of this deal has been quick to push TM stock into the green. As of this writing, it is up roughly 2% for the day. After a difficult week and a worse month, this is exactly the type of catalyst that Toyota needs. But by announcing this battery partnership, it has shown investors seeking EV market exposure that they shouldn’t count it out. Toyota is taking the necessary steps to compete with the nation’s leading EV stocks.
Taking a step to scale its domestic EV production is no small measure for Toyota. But the batteries provided by LG Energy will be built in the U.S. as well. The South Korean company will construct the modules at its facility in Michigan before shipping to Toyota’s production hub in Kentucky. As InsideEVs reports:
“The long-term deal will see LG supply Toyota Motor North America with 20 GWh of high-nickel NCMA (nickel, cobalt, manganese, aluminum) pouch-type cells per year starting in 2025, the same year when the Japanese automaker plans on launching its American-made EV as part of its ambitious plan to sell up to 3.7 million battery-powered cars (Lexus-branded models included) worldwide by 2030.”
This is the type of deal that can benefit both companies. LG Energy Solution will better establish itself as a leader in EV battery production. But Toyota will have the ability to crank out vehicles that won’t just be built in the U.S. They’ll also be powered by batteries also made here.
For consumers, that means the incentive to purchase a Toyota EV will likely be doubled. Once production takes off, TM will likely take its place among the most dominant EV stocks.
The Road Ahead
As InvestorPlace contributor Muslim Farooque notes, Toyota is highly focused on growth and ambitious initiatives. Even before it announced this new battery deal, the company understood the necessity of taking its lineup electric, an initiative that has worked well for General Motors (NYSE:GM).
Toyota also has the type of legacy automaker status that has kept buyers coming back to its dealerships for decades. Now it is in an even better position to offer buyers even more options as they make the switch to driving electric.
LG Energy Solutions has a long history of partnering with other automakers. This makes it the perfect partner to help Toyota continue scaling U.S. operations, securing its place among winning EV stocks in the process.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
