LG Energy Solution and Toyota Tsusho: Building a Circular Future in EV Battery Recycling

The electric vehicle (EV) revolution is not just about manufacturing batteries—it's about ensuring those batteries can be sustainably reused, recycled, and repurposed. LG Energy Solution and Toyota Tsusho's joint venture, Green Metals Battery Innovations, LLC, is a landmark move in this direction. Located in Winston-Salem, North Carolina, the venture's closed-loop recycling system promises to redefine supply chain resilience, slash carbon footprints, and secure a competitive edge in an industry racing to meet regulatory and consumer demands.

Strategic Supply Chain Dominance: Reducing Reliance on Raw Material Imports

The venture's core strength lies in its ability to close the loop on battery materials. By processing 13,500 tons of scrap annually—equivalent to over 40,000 automotive batteries—the facility will extract “black mass,” a concentrate of nickel, cobalt, lithium, and other critical metals. This not only reduces reliance on imported raw materials but also insulates the partners from geopolitical and market volatility in commodities like cobalt (over 70% of which comes from the Democratic Republic of Congo).

LG Energy Solution's Michigan battery plant, which supplies Toyota Motor's EVs, will directly feed scrap into the North Carolina facility, creating a vertically integrated supply chain. This synergy is a masterstroke: by recycling locally, LG avoids the cost and risk of shipping materials overseas for processing—a common practice today.

Investors should note that LG's 13,500-ton capacity in North America already outpaces Tesla's current recycling output, which relies heavily on third-party partners. As EV adoption surges, LG's in-house capability to recycle and reuse materials positions it to undercut competitors on cost and scalability.

Carbon Footprint Reduction: Aligning with Regulatory and ESG Priorities

The venture's environmental impact is equally compelling. Recycling black mass reduces energy use and emissions by up to 50% compared to mining raw materials. For example, producing lithium from recycled sources cuts CO2 emissions by 45% versus traditional mining. This aligns with LG's goal of carbon neutrality by 2050 and Toyota's broader commitment to net-zero supply chains.

Regulatory tailwinds further amplify the venture's value. The EU's Battery Regulation, effective 2027, mandates 10–12% recycled cobalt and nickel in batteries by 2031. While the North American venture isn't directly subject to EU rules, its closed-loop system mirrors compliance-ready processes, ensuring LG and Toyota Tsusho can serve global markets seamlessly.

Investors focused on ESG metrics will find this a compelling differentiator. Companies like Tesla and Volkswagen are scrambling to secure similar recycling partnerships; LG's head start could translate into a first-mover advantage in premium, low-carbon battery contracts.

Global Scalability: From North America to Europe and Beyond

The North Carolina facility is just the beginning. LG's parallel venture with Derichebourg in France—a 20,000-ton recycling plant by 2027—demonstrates a strategic rollout to dominate regional markets. Together, these facilities will process over 33,500 tons annually by 2027, a scale that could meet 15–20% of Europe's EV battery scrap demand by 2030.

This geographic diversification mitigates risks tied to regional supply chain disruptions and positions LG as a one-stop partner for automakers worldwide. Toyota Tsusho's expertise in logistics and materials management further strengthens the venture's ability to scale efficiently.

Investment Outlook: ROI in a Circular Economy

LG Energy Solution's Q1 2025 financials show a return to profitability, driven by cost-cutting and strategic bets like its Michigan expansion and ESS (energy storage system) production. The recycling venture is a natural extension of this strategy, leveraging idle scrap into revenue streams while reducing material costs.

For investors, the venture's ROI hinges on two factors:
1. Cost savings: Recycling reduces the need for expensive, volatile raw material imports.
2. Regulatory leverage: The venture's compliance-ready model could attract premium contracts from automakers aiming to meet ESG targets.

LG's stock has underperformed Tesla and CATL in recent quarters, but this could change as recycling capabilities become a key differentiator. Investors with a 3–5 year horizon should consider gradual exposure, particularly if LG's North American facility meets its 2026 timeline and scales as planned.

Conclusion

LG Energy Solution and Toyota Tsusho's venture isn't just about recycling—it's about building an unassailable moat in the EV battery market. By securing supply chains, cutting emissions, and preparing for regulations, they're setting a blueprint for the circular economy. For investors, this is a bet on sustainability as a profit driver, not just a cost. In a world where ESG compliance and raw material scarcity define winners, this partnership is a clear frontrunner.