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

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

One of the sources, Tesla has not yet agreed to an agreement that will increase LG’s role in its supply chain outside China.

Last week, the Korean battery maker told Korean reporters that it plans to build a U.S. factory where it will make battery cells for EVs and energy storage systems, to cater to U.S. and global customers as well as startups. It did not then identify potential customers, but one of the sources hoped that Tesla would buy the batteries.

In September, Tesla CEO Elon Musk announced an ambitious plan to develop new cells internally, urging suppliers such as LG and Panasonic to adopt the unproven technology or risk the risks of becoming a major customer in the long run. to lose.

The Korean supplier, a unit of LG Chem, made samples for the so-called 4680 large-format cylindrical cells, say the sources who asked not to be identified. People familiar with the matter face technological barriers and the challenge of sharpening production.

“LG plans to manufacture 4680 cells in its new American factory. They plan to build a new 4680 cell line to deliver Tesla’s Giga Berlin to Europe, ” one source said, adding that Spain is one of the candidates for the European plant.

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

He said LG had not yet received orders for the 4680 cells from Tesla, which are still under development. Tesla is currently sharply increasing orders for 2170 cells manufactured in the Model 3 and Model Y vehicles in China.

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

Tesla’s September plan to develop the new 4680 battery cells is intended to reduce production costs, improve battery life and increase driving distance. This could help with Tesla’s pressure 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 the cells at newer plants in Texas and Germany.

Musk recently said Tesla is in talks with battery suppliers about developing 4,680 batteries. He said Tesla would use the current cells for at least a few years, but over time the cells would “retire”.

LG currently supplies smaller cells to Tesla in China, as does Chinese battery maker CATL. Panasonic 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. in Lordstown, Ohio, to make bags of electric vehicle batteries for future GM electric vehicles.

GM has separately said it is considering building a second US battery factory with LG.

The extraordinary candid comments from LG and GM come 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 disrupt battery supply to Ford Motor and Volkswagen .

Tesla rival Lucid Motors, which has a multi-year supply contract with LG Chem and is considering making its own cells, said it is interested in different cell formats, CEO Peter Rawlinson told Reuters earlier.

According to someone familiar with the matter, Panasonic plans to launch a test line for 4,680 cells in Japan in the April 1 fiscal year. The two companies did not say whether they intend to collaborate on the production of the 4680 cells.

Tesla may need to push out the time frame for mass production, or work with partners at its newer plants to get cell production up and running quickly, said Caspar Rawles, an analyst at researcher Benchmark Mineral Intelligence.