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

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

Tesla has not yet agreed to a deal that would expand LG’s role in its supply chain outside of China, one of the sources said.

Last week, the Korean battery maker told Korean reporters that it plans to build a US factory that will make battery cells for electric vehicles and energy storage systems, to serve US and global customers as well as startups. It didn’t identify potential customers at the time, but one of the sources said it hoped Tesla would buy the batteries.

In September, Tesla CEO Elon Musk announced an ambitious plan to develop new cells internally that would allow vendors such as LG and Panasonic to embrace the unproven technology or risk losing a major customer over the longer term.

The Korean supplier, a unit of LG Chem, has prepared samples for the so-called 4680 large-format cylindrical cells, the sources said, asking not to be identified. It faces technological hurdles and the challenge of scaling up production, say people familiar with the issue.

LG plans to produce 4,680 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 the European factory.

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

He said LG has not yet secured orders from Tesla for the 4680 cells, which are still under development. For now, Tesla is heavily ramping up orders for 2,170 cells used in the 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 the new 4680 battery cells aims to reduce manufacturing costs, improve battery performance and extend driving range. This would help Tesla’s drive to significantly boost electric vehicle production around the world.

Tesla runs 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 recently said 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 those cells will “retire” over time.

LG is currently supplying smaller cells to Tesla in China, as is the 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 make electric vehicle batteries for GM’s future electric vehicles.

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

LG and GM’s unusually candid comments came after another Korean battery supplier, SK Innovation, hopes the White House would overturn a recent US trade decision in LG’s favor as it threatens to disrupt battery supplies to Ford Motor and Volkswagen.

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

Panasonic plans to start a 4,680-cell test line in Japan in the fiscal year beginning April 1, according to a person familiar with the matter. The two companies have not said whether they plan to collaborate on the production of the 4680 cells.

Tesla may need to shift 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 with Benchmark Mineral Intelligence researcher.