LG Wants to Build Battery Cells for Tesla in the U.S. and Europe

LG Energy Solutions hopes to start building battery cells for Tesla in 2023. Sources told Reuters the company is looking at possible production sites in the U.S. and Europe. However, the sources added that Tesla hasn't agreed to a deal to expand LG's role in its supply chain outside China yet.

LG wants to expand its role with Tesla

The Korean firm told reporters last week that it is planning to build a factory in the U.S. to make battery cells for electric vehicles and energy storage systems. It wants to target startups and U.S. and global customers with its battery cells. Although LG didn't name Tesla or any other companies as potential customers at the time, sources told Reuters it hoped Tesla would purchase its battery cells.

Tesla CEO Elon Musk announced plans to develop new battery cells in-house in September, which caused suppliers like Panasonic and LG to pursue unproven technologies or risk losing a major customer. The sources said LG Energy Solutions, a division of LG Chem, built samples for its 4680 large-format cylindrical cells. They also said the company is dealing with technological issues and the challenges associated with scaling production.

The sources added that LG plans to build the 4680 battery cells at its new factory in the U.S. The Korean battery firm aims to construct a new 4680 cell line to supply Tesla's Giga Berlin factory in Europe. They also said Spain is a potential candidate to receive the European plant.

Challenges in battery production

Further, the sources said LG hadn't mass-produced such large-format cylindrical cells yet, but boosting battery capacity is the right thing to do. They explained that Tesla is an important customer, and LG can take risks.

The automaker hasn't ordered any 4680 cells, which are still being developed, from LG yet. At this point, Tesla is significantly increasing its orders for 2170 cells, which are used in the Model Ys and Model 3s produced in China.

By producing the 4680 cells in-house, Tesla aims to cut its production costs, improve the performance of its batteries and boost driving range. Those goals would help with the automaker's push to increase EV production significantly around the globe. Tesla has a pilot factory for the cells in California and is preparing to build them at newer facilities in Germany and Texas. Musk also said it is negotiating with battery suppliers about developing the 4680 cells.

Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their families.