South Korean chemical giant and battery manufacturer LG Chem will reportedly double production capacity of battery cells at its Chinese plants in 2021 in order to keep up with demand from US electric vehicle darling Tesla.
According to “sources” and “two people with knowledge of the matter” speaking to Reuters, LG Chem – which now sells its EV battery and energy storage products under “LG Energy Solution” – will also begin to ship its increased battery cell output from China as well as Korea to Tesla’s factories in Germany and the United States.
Tesla is LG Chem’s primary customer and according to Reuters is “scrambling” to secure battery cells as part of an aggressive global production expansion plan.
LG Chem has already added additional production lines in South Korea this year in an effort to meet demand for Tesla’s manufacturing plant in the United States, according to the “people” speaking to Reuters.
The anonymous sources also revealed that Tesla has asked Japan’s Panasonic Corp., which also supplies batteries to the US manufacturing plant, to also supply its Shanghai factory.
“Tesla simply doesn’t have enough battery cells,” said the person. “So LG Chem is going to more than double China output.”
Despite recent efforts to increase supply, Tesla CEO Elon Musk has said that battery supplies are still insufficient to meet his company’s demand, and that Tesla will therefore move to make its own battery cells.
Such a move might have a knock-on effect for battery suppliers’ pricing power, so it is unsurprising that more traditional battery manufacturing companies are looking to scale up their production and supply.
“We’re continuing to expand capacity for cylindrical battery cells in response to growing demand from automakers but we can’t comment on specific customers,” an LG Chem spokesman said, speaking to Reuters.
LG Chem had already announced plans to triple capacity of cylindrical cells to 60GWh by 2023.
Further, LG Chem is expected to invest $US500 million over the next year to raise annual production capacity of 21700 cylindrical battery cells at its Nanjing plant by 8GWh. According to Reuters’ anonymous sources, this would require increasing the company’s production lines from 8 to 17.