Battery Maker LG Chem Aims to Supply Tesla with Batteries in 2023, Plans to Build a New Factory in the U.S. or Europe
【Summary】Battery maker LG Chem is aiming to build electric vehicle batteries for Tesla by 2023. To support its goal, LG is planning to build a new battery factory in the U.S. or Europe, where its will produce the battery cells for Tesla.
LG Energy Solutions is one of the world's biggest suppliers of batteries to the auto industry as a division of South Korea's LG Chem. Now reports are surfacing that LG is aiming to build batteries for electric carmaker Tesla by 2023, Reuters reports. To support its goal, LG is planning to build a new battery factory in the U.S. or Europe, where its will produce the battery cells for Tesla.
Last week, LG told Korean reporters that it plans to build a U.S. factory where it would make battery cells for Tesla's EVs, as well as for its energy storage systems. The plant will supply batteries to other U.S. and global customers, as well as startups.
Although LG It did not identify potential customers for its U.S. battery factory, one of the sources said it was hoping Tesla would buy the batteries, according to the Reuters report.
However at this early stage of negotiations, Tesla has not yet agreed to a deal that would expand LG's role in its supply chain beyond China, one of the sources told Reuters.
LG Chem is one of Tesla's battery suppliers for its China-made vehicles along with CATL, while Japan's Panasonic builds batteries in a joint venture with Tesla for its US-built vehicles, which are exported around the world. Panasonic partnered with Tesla on a $5 billion battery "gigafactory" near Reno, Nevada.
LG Energy Solutions has made samples of the 4680 large-format cylindrical cells, said the sources, who asked not to be identified. But the battery maker is facing technological hurdles and the challenge of scaling up production, people familiar with the matter said.
One of the sources said LG has never mass produced such large-format cylindrical cells, although increasing battery capacity will be a necessity as a supplier to Tesla.
"Tesla is a major customer, and LG can take risks," another source said.
"LG plans to produce 4680 cells at its new U.S. factory. They plan to build a new 4680 cell line to supply Tesla's Giga Berlin in Europe," one of the sources said, adding Spain is one of locations being considered for the European plant.
So far, Tesla has not ordered any batteries from LG, as the 4680 cells are still in development.
But Tesla is boosting orders for the 2170 type cells used in the Model 3 and Model Y vehicles produced and sold in China, the source said.
In September at Tesla's much hyped Battery Day event, Chief Executive Elon Musk announced an ambitious plan to develop advanced battery cells in-house, which would lessen its reliance on Asian suppliers.
Musk said recently Tesla is in talks with battery suppliers about developing the new 4680 batteries. He said Tesla will use the current cells for at least a few years, but will "retire" those cells over time.
Tesla could not be reached for comment.
Tesla's plan to develop the new 4680 battery cells in-house is meant to reduce production costs, improve battery performance and increase driving range. This would help Tesla in its goalto boost electric vehicle production significantly around the world. The new more energy-dense 4680 cells can increase the range of Tesla's electric vehicles by up to 16%.
But Tesla's decision to develop its own batteries is intended to make up for expected batteries shortages over the next several years, as demand rises from automakers, meaning that Tesla will still enter into other supply deals.
In a tweet on Sept 21, 2020, Musk wrote "We intend to increase, not reduce battery cell purchases from Panasonic, LG & CATL (possibly other partners too). However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 & beyond unless we also take action ourselves."
Tesla is running a pilot factory for the new battery cells in California, and preparing to build those cells at newer plants in Texas and Germany.
Tesla's current battery partner Panasonic plans to start a test line for the new 4680 cells in Japan in the business year beginning April 1, according to sources familiar with the plans that spoke to Reuters. But the two companies have not confirmed any plans to collaborate on production of the new 4680 cells.
LG also has a $2.3 billion joint venture with automaker General Motors to build a battery factory in Lordstown, Ohio. The factory will produce "pouch-cell" electric vehicle batteries for future GM electric vehicles. The factory is currently under construction.
GM said separately it is considering building a second U.S. battery factory with LG to support its ambitious goal of producing only fully-electric passenger vehicles by 2035.
Tesla's newest rival Lucid Motors also has a multi-year supply deal with LG Chem. The California startup plans to launch its IPO this spring and deliver the first batch of Lucid Air sedans to customers later this year.
Tesla's move to build its own batteries or enter into new supply deals is critical to the company's future success. The company cannot ramp up its global vehicle production without a steady supply of EV batteries. But for automakers like Tesla, these deals must be made well in advance.
Tesla may need to push out the timeframe for mass production, or work with partners at its newer plants in order to get cell production up and running quickly, said Caspar Rawles, an analyst at researcher Benchmark Mineral Intelligence.
resource from: Reuters
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