Strategic Cross-Border Investment in Battery Supply Chains: Toyota Tsusho's Stake in LG Chem’s Gumi Plant

The global transition to electric vehicles (EVs) is reshaping industrial landscapes, with battery supply chains emerging as a critical battleground for geopolitical and economic influence. Toyota Tsusho’s recent acquisition of a 25% stake in LG Chem’s Gumi cathode materials plant in South Korea exemplifies this shift. This investment, which positions Toyota Tsusho as the second-largest shareholder in the facility, underscores a strategic alignment between Japan and South Korea to strengthen their competitive edge in the EV sector while navigating the complex dynamics of U.S.-China competition and regional supply chain resilience [1].

Strategic Rationale: Aligning with the U.S. Inflation Reduction Act

Toyota Tsusho’s investment is not merely a commercial decision but a calculated move to comply with the U.S. Inflation Reduction Act (IRA), which mandates that battery components be manufactured in North America to qualify for tax credits. By securing a stake in LG Chem’s Gumi plant—now a key supplier of cathode active materials—Toyota Tsusho ensures a stable supply of materials for North American battery manufacturers. This aligns with the IRA’s goal of localizing production and reducing reliance on Asian supply chains, particularly those dominated by China [1].

China’s dominance in the battery sector, with 70–90% of global production capacity, has long been a vulnerability for countries seeking to decouple from its supply chain. By partnering with LG Chem, Toyota Tsusho mitigates this risk while leveraging South Korea’s expertise in cathode material innovation. LG Chem’s 51% ownership stake in the Gumi plant, combined with Toyota Tsusho’s strategic input, creates a hybrid model that balances technological leadership with geopolitical pragmatism [3].

Geopolitical Implications: Japan-Korea Collaboration Amid Historical Tensions

The partnership between Toyota Tsusho and LG Chem also reflects a broader rapprochement between Japan and South Korea, two nations historically divided by colonial-era tensions. While diplomatic frictions, such as the 2018 export dispute over wartime labor issues, have periodically strained relations, recent years have seen a thaw. In 2024, a summit between South Korean President Yoon Suk-yeol and Japanese Prime Minister Kishida Fumio marked a renewed commitment to collaboration in critical industries, including EVs and semiconductors [4].

This collaboration is driven by shared concerns over China’s technological ascendancy. As China’s battery dominance threatens to lock in long-term dependencies, Japan and South Korea are aligning their industrial strategies to diversify supply chains and invest in next-generation technologies. South Korea’s $15.1 billion plan for future battery research by 2030 and Japan’s LIBTEC initiative highlight this ambition [1]. Toyota Tsusho’s investment in LG Chem’s Gumi plant is a microcosm of this broader strategy, blending Japanese logistical expertise with South Korean manufacturing prowess.

Supply Chain Resilience and Market Dynamics

The investment also addresses vulnerabilities in the global battery supply chain. Cathode active materials, a critical component of lithium-ion batteries, remain concentrated in politically unstable regions for raw materials. By securing a stake in a North American-servicing plant, Toyota Tsusho and LG Chem reduce exposure to such risks. This is particularly important as the U.S. seeks to build a domestic EV ecosystem, with over 90% of current battery components still sourced from Asia [2].

Market dynamics further amplify the significance of this partnership. With global EV sales projected to surpass 25% of total vehicle sales in 2025, competition for supply chain dominance is intensifying. China’s control over 85% of global battery cell production capacity as of 2023 [4] has spurred U.S. and European efforts to localize production. Toyota Tsusho’s investment aligns with these trends, enabling it to supply cathode materials to North American battery manufacturers while adhering to IRA requirements.

Conclusion: A Model for Future Cross-Border Collaborations

Toyota Tsusho’s stake in LG Chem’s Gumi plant is more than a corporate transaction—it is a blueprint for navigating the intersection of geopolitics, market forces, and technological innovation. By aligning with South Korea’s battery expertise and the IRA’s regulatory framework, Toyota Tsusho secures its position in a rapidly evolving industry while contributing to regional supply chain resilience. This collaboration also signals a shift in Japan-South Korea relations, where shared economic interests are increasingly outweighing historical grievances.

As the U.S.-China competition for EV dominance intensifies, such cross-border partnerships will become pivotal. They not only address immediate supply chain challenges but also lay the groundwork for a more diversified and resilient global energy transition.

Source:
[1] The geostrategic race for leadership in future electric vehicle technologies [https://pubs.rsc.org/en/content/articlehtml/2025/ee/d5ee00301f]
[2] Auto Giants Race to Build U.S. EV Battery Assembly Plants [https://www.areadevelopment.com/Automotive/q1-2022/auto-giants-race-to-build-US-EV-battery-assembly-plants.shtml]
[3] Japan, South Korea and the Imperative for Cooperation in the Middle East [https://mecouncil.org/publication/beyond-competition-japan-south-korea-and-the-imperative-for-cooperation-in-the-middle-east/]
[4] The China factor in Japan and South Korea's rapprochement [https://www.uts.edu.au/news/2024/10/china-factor-japan-and-south-koreas-rapprochement-implications-australia]