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The US Energy Department intends to loan Ultium Cells LLC, a joint venture of GM and LG Energy Solution, $2.5 billion to build new lithium-ion battery manufacturing facilities.

The loan stipulates that new facilities need to be built in Ohio, Tennessee, and Michigan. The capital for the loan comes from the government’s Advanced Technology Vehicles Manufacturing (ATVM) loan program, which has not funded a new loan since 2010.

Reuters was the first to report on the news and the plan would mark the Energy Department’s first loan exclusively for a battery cell manufacturing project under the vehicle program.

“We have to have vehicle manufacturing capacity but also battery manufacturing capacity,” said Jigar Shah, who directs the Energy Department loan program office, in an interview with Reuters.

“This project provides one of the newest additions to battery manufacturing scale in this country.”

Ultium said in a statement that the “facilities will create more than 5,000 new high-tech jobs in the United States. We are grateful for the consideration and look forward to working with the Department of Energy on next steps.”

Altogether, GM and LG have invested more than $7 billion via the Ultium joint venture to build three battery plants. Production at its Ohio site is expected to begin in August. 

Production is set to begin at the Tennessee plant in late 2023, while production will start in Michigan in 2024. 

“The goal is to… help these companies move faster and farther than they otherwise would have,” Shah said. The loan agreement requires Ultium to offer employees the local prevailing wage and fringe benefits.

The loan program had previously provided low-cost lending deals to Tesla, Ford, and Nissan, which included some cell manufacturing. However, despite President Biden’s target of half of all US auto production being electric or plug-in hybrid by 2030, Shah doesn’t believe that there will be any further loans issued to support car or battery production.

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