FILE PHOTO: Visitors wearing face masks check a China-made Tesla Model Y sport utility vehicle (SUV) at the electric vehicle maker's showroom in Beijing, China January 5, 2021 |
Tesla has not yet agreed to a deal that would expand LG's
role in its supply chain beyond China, one of the sources said.
Last week, the Korean battery maker told Korean reporters it
plans to build a U.S. factory where it would make battery cells for EVs and
energy storage systems, to cater to U.S. and global customers as well as
startups. It did not identify potential customers then, but one of the sources
said it was hoping Tesla would buy the batteries.
In September, Tesla Chief Executive Elon Musk announced an
ambitious plan to develop new cells in-house, prompting suppliers like LG and
Panasonic to embrace the unproven technology or face risks of losing a major
customer for the longer term.
The Korean supplier, a unit of LG Chem, has made samples for
the so-called 4680 large-format cylindrical cells, said the sources, who asked
not to be identified. It faces technological hurdles and the challenge of
scaling up production, people familiar with the matter said.
"LG plans to produce 4680 cells at its new U.S.
factory. They plan to build a new 4680 cell line to supply Tesla's Giga Berlin
in Europe," one of the sources said, adding Spain is one of candidate for
the European plant.
One of the sources said LG has never mass produced such
large-format cylindrical cells, although increasing battery capacity is the
correct call. "Tesla is a major customer, and LG can take risks,"
another source said.
He said LG has not yet secured orders from Tesla for the
4680 cells, still under development. For now, Tesla is sharply boosting orders
for 2170 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
is meant to reduce production costs, improve battery performance and increase
driving range. This would help with Tesla's push to boost electric vehicle
production significantly around the world.
Tesla is running a pilot factory for the new battery cells
in California, and preparing to build those cells at newer plants in Texas and
Germany.
Musk said recently Tesla is in talks with battery suppliers
about developing 4680 batteries. He said Tesla will use the 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 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 pouch-type electric vehicle batteries for
future GM electric vehicles.
GM said separately it is considering building a second U.S.
battery factory with LG.
The unusually candid comments from LG and GM came after
another Korean battery supplier, SK Innovation, hopes the White House would
overturn a recent U.S. trade ruling favoring LG, saying it threatens to disrupt
battery supplies to Ford Motor and Volkswagen.
Tesla rival Lucid Motors, which has a multi-year supply deal
with LG Chem, and is considering whether to make its own cells in house, said
it is interested in different cell formats, Chief Executive Officer Peter
Rawlinson earlier 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 have not said if they plan to collaborate on
production of the 4680 cells.
Tesla may need to push out the timeframe for mass production, or work with partners at its newer plants in order to get cell production up and running quickly, said Caspar Rawles, an analyst at researcher Benchmark Mineral Intelligence.
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