SAN FRANCISCO – LG Energy Solution plans to build Tesla Inc’s advanced battery cells for electric vehicles in 2023 and is considering potential manufacturing locations in the US and Europe, according to two people familiar with the matter .
Tesla has not yet reached a deal to expand LG’s role in its supply chain beyond China, one of the sources said.
Last week, the Korean battery maker told Korean reporters it was planning to build a US factory to produce battery cells for electric vehicles and energy storage systems to serve US and global customers and startups. Potential customers weren’t identified at the time, but one of the sources was hoping Tesla would buy the batteries.
In September, Tesla CEO Elon Musk announced an ambitious plan to develop new cells in-house, prompting suppliers like LG and Panasonic to take advantage of the unproven technology or take the risk of losing a large customer in the long run.
The Korean supplier, a unit of LG Chem, has made samples for the so-called 4680 large-format cylindrical cells, said the sources, who asked not to be identified. It faces technological hurdles and the challenge of scaling up production, according to those familiar with the matter.
“LG plans to produce 4680 cells at its new US facility. 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 is one of the candidates for that European plant.
According to one of the sources, LG has never mass-produced such large-sized cylindrical cells, although increasing the battery capacity is the right call. “Tesla is an important customer and LG can take risks,” another source said.
He said LG has not yet received orders from Tesla for the 4680 cells, which are still under development. Currently, Tesla is significantly increasing orders for 2,170 cells used in China-made Model 3 and 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 reduce production costs, improve battery performance and increase range. This would help Tesla’s drive to significantly increase the production of electric vehicles around the world.
Tesla operates a pilot plant for the new battery cells in California and is preparing to build these cells in newer plants in Texas and Germany.
Musk recently said Tesla is in talks with battery suppliers about developing 4680 batteries. He said Tesla will use the current cells for at least a few years, but will “retire” 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 of Lordstown, Ohio to manufacture pouch-type electric vehicle batteries for future GM electric vehicles.
GM separately said it was considering building a second U.S. battery factory with LG.
The unusually sincere comments from LG and GM came after another Korean battery supplier, SK Innovation, hoped the White House would overturn a recent U.S. trade ruling in favor of LG, saying it threatens to disrupt battery supplies Ford engine and Volkswagen.
Tesla rival Lucid Motors, which has signed a multi-year supply deal with LG Chem and is considering making its own cells in-house, said it was interested in a variety of cell formats, CEO Peter Rawlinson previously said.
Panasonic plans to start a test line for 4680 cells beginning April 1 in January, according to a person familiar with the matter. The two companies haven’t said whether they want to work together on the production of the 4680 cells.
Tesla may need to shift the mass production timeframe or work with partners at its newer plants to get cell production up and running quickly, said Caspar Rawles, an analyst with researcher Benchmark Mineral Intelligence.
(By Hyunjoo Jin. Additional reporting by Paul Lienert in Detroit, Tim Kelly in Tokyo and Heekyong Yang in Seoul; editing by Ben Klayman and David Gregorio)