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

SAN FRANCISCO (Reuters) – LG Energy Solution plans 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 an agreement that will expand LG’s role in its supply chain beyond China, one of the sources said.

Last week, the Korean battery manufacturer told Korean reporters that it plans to build a factory in the U.S. where it would make battery cells for EVs and energy storage systems, to serve U.S. and global customers, as well as startups. He did not identify potential customers, but one of the sources said he expected Tesla to buy the batteries.

In September, Tesla Chief Executive Elon Musk announced an ambitious plan to develop new cells internally, prompting suppliers like LG and Panasonic to adopt unproven technology or face the risk of losing a large customer in the long run.

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

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

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

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

LG declined to comment, and Tesla employees 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 battery life. This would help Tesla’s drive to significantly increase production of electric vehicles worldwide.

Tesla is running a pilot plant for the new battery cells in California and is preparing to build those cells in newer plants in Texas and Germany.

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

LG currently supplies smaller cells to Tesla in China, as does the Chinese battery manufacturer CATL. Panasonic partnered with Tesla on 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 manufacture pouch-type electric vehicle batteries for future GM electric vehicles.

GM said separately that it is considering building a second battery factory in the United States with LG.

Unusually candid comments from LG and GM came after another Korean battery supplier, SK Innovation, expects the White House to overturn a recent U.S. commercial decision favoring LG, saying it threatens to stop supplying batteries to Ford Motor and Volkswagen.

Tesla’s rival Lucid Motors, which has a multi-year supply contract with LG Chem, and is considering whether to make its own cells internally, said it is interested in different cell formats, Chief Executive Peter Rawlinson told Reuters .

Panasonic plans to start a test line for 4680 cells in Japan in the business year beginning April 1, according to a person familiar with the matter. The two companies did not say whether they plan to collaborate in the production of the 4680 cells.

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