Exclusive: LG hopes to make new battery cells for Tesla in 2023 in US or Europe – sources

SAN FRANCISCO (Reuters) – LG Energy Solution aims to build advanced battery cells for Tesla Inc electric vehicles in 2023 and is considering potential production sites in the United States and Europe, two people familiar with the matter told Reuters.

Tesla has yet to agree to a deal that would expand LG’s role in its supply chain beyond China, one of the sources said.

Last week, the Korean battery maker told Korean reporters that it plans to build an American factory where it will manufacture battery cells for electric vehicles and energy storage systems, to meet customer needs. American and global as well as startups. He did not identify any potential customers at the time, but one of the sources said she was hopeful Tesla would buy the batteries.

In September, Tesla chief executive Elon Musk announced an ambitious plan to develop new cells in-house, prompting vendors like LG and Panasonic to embrace the unproven technology or run the risk of losing a major customer in the long run. term.

The Korean supplier, a unit of LG Chem, carried out samples for the so-called large-format column cells 4680, the sources said, who asked not to be identified. It faces technological hurdles and the challenge of increasing production, people familiar with the matter said.

“LG plans to produce 4,680 cells at its new US plant. They plan to build a new 4680 cell line to supply Tesla’s Giga Berlin in Europe, ”said one of the sources, adding that Spain was one of the candidates for the European plant.

One of the sources said LG has never mass-produced cylindrical cells of such a large size, although increasing battery capacity is the correct call. “Tesla is a major customer and LG can take risks,” said another source.

He said LG has yet to secure orders from Tesla for the 4,680 cells, which are still under development. For now, Tesla is dramatically increasing orders for 2,170 cells used in Chinese-made Model 3 and Model Y vehicles, the source said.

LG declined to comment and Tesla officials could not be reached for comment.

Tesla’s September plan to develop the new 4680 battery cells aims to lower production costs, improve battery performance, and increase range. This would help Tesla significantly boost the production of electric vehicles around the world.

Tesla runs a pilot plant for new battery cells in California and is preparing to build these cells at new plants in Texas and Germany.

Musk recently said Tesla is in talks with battery suppliers to develop 4,680 batteries. He said Tesla will use the current cells for at least a few years, but “pull out” those cells over time.

LG is currently supplying smaller cells to Tesla in China, as is Chinese battery maker CATL. Panasonic has partnered with Tesla in a $ 5 billion battery “gigafactory” near Reno, Nevada.

LG currently has a $ 2.3 billion joint venture with General Motors Co in Lordstown, Ohio, to manufacture pouch-type electric vehicle batteries for future GM electric vehicles.

GM has said separately that it plans to build a second battery plant in the United States with LG.

The unusually outspoken comments from LG and GM came after another Korean battery supplier, SK Innovation, hopes the White House will reverse a recent US trade decision in favor of LG, saying it threatened to disrupt supply. in batteries from Ford Motor and Volkswagen.

Tesla’s rival Lucid Motors, which has a multi-year supply contract with LG Chem, and plans to manufacture its own cells in-house, has said it is interested in different cell formats, CEO Peter Rawlinson said. to Reuters.

Panasonic plans to launch a test line for 4,680 cells in Japan in the commercial year beginning April 1, according to a person familiar with the matter. The two companies did not say whether they plan to collaborate on the production of the 4,680 cells.

Tesla might need to push back the mass production deadline or work with partners at its new factories to get cell production up and running quickly, said Caspar Rawles, analyst at researcher Benchmark Mineral Intelligence.