Tesla considers a stake in LG Chem batteries


Tesla is considering taking a stake in LG Energy Solution, LG Chem’s planned battery subsidiary reports local media. Tesla has also signed a supply contract for lithium from the USA.

In South Korea, LG Chem is planning to transfer its battery division to an independent company called LG Energy Solution from December 2020. In addition to battery cells for electric cars, this will include batteries for smartphones and other mobile devices. As the Korea Times reports, citing sources from the banking sector, Tesla is planning to consider a stake of up to ten per cent in LG Energy Solution.

While a decision has not yet been made, one source used by the Korea Times confirmed the plans for the acquisition of up to ten per cent, another source familiar with the transactions expressed themselves with more reserve, saying: “It’s quite early to tell if Tesla has an actual plan to acquire a stake in LG Energy Solution. But given Tesla’s growing attempts at cost cuts and moves in producing round batteries, it does make sense that Tesla would explore an opportunity to buy a stake in LG Energy Solution.”

From Tesla’s point of view, the Californian company would benefit from a direct investment in securing their all-important battery supply chain. For Gigafactory 3 near Shanghai, Tesla purchases battery cells from LG Chem and CATL. In July this year, LG Chem announced that it intended to convert part of its battery cell production in South Korea for the manufacture of Tesla batteries. According to Reuters, the capacity at LG Chem’s plant in Nanjing, China that has been supplying Tesla’s Shanghai Gigafactory up to now is no longer sufficient.

During Tesla’s Battery Day presentation, Elon Musk said that despite plans for its own battery cells, the still company expects to have to purchase even larger volumes in future than today from its existing or other battery cell partners.

According to analysts, Tesla could also continue to cooperate with production partners in its cell production. “Tesla will hand over the battery manufacturing to partners, the same as now, rather than doing its own battery cell manufacturing,” says Mark Newsman of Bernstein Research, for example, in a report co-written by Steven Chen, Yan Li and Jane Wang. “We believe the possibility of this scenario is high considering the execution risk … Tesla invest in part of the cell manufacturing process but still partners with a cell manufacturer for the rest of the cell manufacturing process”.

In the meantime, it has become clear where Tesla will get part of its lithium needed for cell production: from the USA. Piedmont Lithium has announced a binding contract with Tesla to supply spodumene concentrate (SC6) from its North Carolina deposit. Spodumene is a lithium mineral containing between 1.9 and 3.7 per cent lithium oxide (source: German Raw Materials Agency) whereby commercially marketed concentrates have a higher percentage.

The contract between Piedmont and Tesla has an initial term of five years from initial delivery and represents a binding purchase commitment at a fixed price. The contract can be extended by mutual agreement for a further five years. With this contract, Tesla secures access to approximately one-third of Piedmont’s planned SC6 production of 160,000 tons per year, making up about 53,000 tons per year. Further quantities are to be supplied if Tesla so requires.

In announcing the deal, Piedmont the two partners have set the boundaries for the date of the first delivery. Here the agreement is that date will be set between July 2022 and July 2023 based on the development plans of both parties.

In line with this time frame and also plans of localising sourcing whenever possible, the Californian electric car and truck manufacturer has purchased another 150 hectares of land near Austin. It is where Tesla is currently building the Gigafactory for the Cybertruck, the Semi and the Model Y. The Statesman reported the purchase referring to land registry entries. Tesla has already purchased 800 hectares of land in Austin but is still looking for more land nearby. After Battery Day, this naturally feeds rumours about another Terafactory where Tesla could manufacture the cells of the new type 4680.

With reporting by Sebastian Schaal, Germany.

koreatimes.co.kr (LG-Chem rumours), piedmontlithium.com (Lithium-contract), teslamag.de (property purchase in Texas)


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