Exclusive: LG hopes to make new batteries for Tesla in 2023 in the 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 not yet agreed to a deal that would expand LG’s role in its supply chain beyond China, one source said.

Last week, the Korean battery maker told Korean reporters that it plans to build a U.S. plant to produce battery cells for electric vehicles and energy storage systems to satisfy U.S. and global customers, as well as startups. urile. He did not identify potential customers at the time, but one source said he hoped Tesla would buy the batteries.

In September, Tesla CEO Elon Musk announced an ambitious plan to develop new internal cells, prompting vendors such as LG and Panasonic to adopt unproven technology or face the risks of losing a major long-term customer.

The Korean supplier, a unit of LG Chem, conducted tests for the so-called 4680 large-format cylindrical cells, sources said, asking that they not be identified. They face technological hurdles and the challenge of expanding production, said people familiar with the issue.

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

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

He said LG has not yet received orders from Tesla for the 4680 cells still under development. For now, Tesla is sharply increasing orders for 2170 cells used in Model 3 and Model Y vehicles made in China, the source said.

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

Tesla’s September plan to develop new 4680 batteries is designed to reduce production costs, improve battery performance and increase running range. This would help Tesla’s momentum to significantly increase 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 newer plants in Texas and Germany.

Musk recently said that Tesla is in talks with battery suppliers about the development of 4680 batteries. He said Tesla will use the current cells for at least a few years, but will “withdraw” those cells over time.

LG currently supplies smaller Tesla cells in China, as does Chinese manufacturer CATL batteries. Panasonic has partnered with Tesla in a $ 5 billion “gigafactory” battery near Reno, Nevada.

LG currently has a $ 2.3 billion joint venture with General Motors Co. of Lordstown, Ohio, to produce battery-powered electric vehicle batteries for future GM electric vehicles.

GM has stated separately that it plans to build a second US battery plant with LG.

Unusually sincere comments from LG and GM came after another Korean battery supplier, SK Innovation, hoped the White House would overturn a recent US trade decision in favor of LG, saying it threatened to cut off battery supply to Ford Motor and Volkswagen. .

Tesla’s rival, Lucid Motors, which has a multi-year supply contract with LG Chem and is considering producing its own cells indoors, said it was interested in various cell formats, Peter Rawlinson, CEO, told Reuters.

Panasonic plans to launch a test line for 4680 cells in Japan in the business year starting April 1, according to a person familiar with the problem. The two companies did not say whether they intend to collaborate in the production of the 4,680 cells.

Tesla may have to eliminate time to mass production or work with partners at its newer plants to get cell production up and running quickly, said Caspar Rawles, an analyst at Benchmark Mineral Intelligence researcher.