Tesla Looks for New Battery Suppliers to Boost Model 3 Production
【Summary】After securing another battery supplier, Tesla will be more equipped to scale production for the Model 3. Out of the three battery suppliers, LG Chem will likely be awarded with a partnership agreement.
Elon Musk's quest to make the Tesla Model 3 a mainstream EV for modern drivers comes with numerous challenges. The vehicle, which is priced at $35,000, heavily relies on the company's ability to either manufacture its own power cells (at the Gigafactory) or form strategic partnerships with battery suppliers.
In order to meet tight production deadlines for the Model 3, Tesla has started to explore the latter option. A report from Korea Times revealed the automotive establishment may tap a top-tier power cell supplier from South Korea – specifically, LG Chem, Samsung SDI or SK Innovation.
"The third large cell supplier is Automotive Electric Supply Corporation (AESC), the joint venture between Nissan and Japanese computer giant NEC. That venture supplies cells for the current Nissan Leaf, the world's best-selling electric car," explained John Voelcker from Green Car Reports.
Diversifying Power Cell Suppliers
Out of the three battery suppliers, LG Chem will likely be awarded with a power cell partnership agreement (though it is unclear exactly how many partners Tesla is seeking out at this time). This is because the business, as a top 3 global battery supplier, has a reliable track record with production deliveries and decades of experience working with large brands, such as Google. LG Chem currently supplies lithium-ion batteries for more than 12 EVs, including the Chevy Bolt EV.
Interestingly, LG (under LG Display) was previously chosen as the main supplier for the Model 3's center display panel, measuring 15 inches.
"This is why LG Chem, Samsung SDI and SK Innovation all are keenly interested in boosting their tie-up with Tesla. The three Korean battery manufacturers can't afford to lose the new business given the Model 3's impressive initial responses from customers," said a company official during an interview with Korea Times.
Panasonic and Tesla
So far, Panasonic has been benefiting from a battery supply agreement with Tesla, which focuses on the use of custom cells for the automaker's EVs. Through the collaboration, Panasonic hopes to break into the top 10 list of international auto suppliers.
For the production of the Model 3, the electronics giant is manufacturing 2170 cells at Gigafactory 1 in Nevada. According to Hirokazu Umeda, Panasonic's Chief Financial Officer, the company expects to start profiting from the batteries next year. Initially, during the start of production, the business absorbed some financial losses.
It is important to highlight that Panasonic was an early investor in the EV company. The establishment has been working with Tesla since 2012. An update from the establishment revealed it has successful addressed power cell production bottlenecks related to the Model 3 and will begin automating the manufacturing process. By automating battery production, the number of cars to roll out of the factory will increase exponentially.
After securing another battery supplier, Tesla will be more equipped to scale production for the Model 3. Originally, Musk set a 2020 deadline for meeting its annual production target of 500,000 EVs. Recently, the Tesla CEO confirmed the business will be able to achieve this rate by 2018.
Michael Cheng is a legal editor and technical writer with publications for Blackberry ISHN Magazine Houzz and Payment Week. He specializes in technology business and digesting hard data. Outside of work Michael likes to train for marathons spend time with his daughter and explore new places.
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