LG Energy Solution Ltd (LGES) of South Korea announced on Friday that it will invest 7.2 trillion won ($5.58 billion) to build a battery factory in Arizona, restarting a project that was halted last year due to adverse economic conditions.

The world's third-ranked electric vehicle battery manufacturer, which supplies Tesla Inc, Lucid Group Inc, and other automakers, announced in June that it was reevaluating a 1.7 trillion won investment plan due to "unprecedented" economic conditions, just three months after the plan was first announced.

LGES said in January that it was in "active discussions" with Tesla and electric vehicle startups about supplying batteries from the proposed factory.

According to LGES, the new Arizona factory will have two manufacturing facilities: one for cylindrical batteries for electric vehicles (EV) and another for lithium iron phosphate (LFP) pouch-type batteries for energy storage systems (ESS).

"The company’s decision to increase investment in cylindrical EV battery production in North America comes from rising demand from EV makers for locally manufactured high-quality, high-performance batteries in an effort to satisfy the Inflation Reduction Act's (IRA) EV tax credits," the company said in a statement. Automakers and EV battery producers are racing to set up manufacturing in the United States to take advantage of federal subsidies that could generate up to $45 per kilowatt hour (kWh) to offset the costs of production.

LGES, which supplies Tesla and other companies, also has manufacturing facilities in South Korea, China, Poland, Canada, and Indonesia.