It appears that battery maker LG Chem Ltd is looking to produce batteries for American electric car maker Tesla at one of its local facilities in South Korea. This strategy, which was related to Reuters by a person familiar with the matter, is reportedly propelled by the increasing demand for Tesla’s products, such as the Model 3 and the Model Y.
That being said, Tesla is reportedly still looking for other battery suppliers, despite its deal with LG Chem. This bodes well for Tesla and its electric vehicles and energy storage systems, both of which are ramping quickly. “Tesla is asking not only LG Chem but other suppliers to increase supplies, as its cars are selling well,” the media outlet’s source stated.
Citing another person who is reportedly familiar with the companies’ plans, Reuters noted that LG Chem is converting some of its production in South Korea to make batteries for Tesla. This is an interesting development, especially since an LG Chem facility in Nanjing, China, already manufactures battery cells for Tesla’s Gigafactory Shanghai.
So far, both Tesla and LG Chem have opted to remain silent on the reports. An LG Chem spokesman declined to comment, while Tesla was not immediately available for comment outside its US business hours.
Provided that the information related by Reuters’ sources is accurate, Tesla seems to be set on producing even higher numbers of vehicles from its Gigafactory Shanghai plant. The facility, after all, is already being supplied by both LG Chem and CATL, with the latter reportedly working with Tesla on the rollout of a million-mile battery cell for the electric car maker’s vehicles.
A deal that would secure a stronger battery supply chain for Gigafactory Shanghai would most definitely be strategic in the long run. This will most certainly play to Tesla’s advantage considering that the China-based electric car factory is preparing to produce the Model Y, which happens to compete in the popular and lucrative crossover segment. The Model Y is expected to dwarf the sales of the Model 3, which suggests that Tesla will need a lot of batteries to support the production ramp of the vehicle.
Quite interestingly, both Tesla and LG Chem are performing well in the markets despite the presence of the coronavirus, which has adversely affected multiple industries worldwide. Following the release of Tesla’s Q2 2020 vehicle production and delivery report on Thursday, TSLA shares rose up 7.95%, reaching new all time highs and ending the day at $1,208.66 per share. LG Chem, for its part, is outperforming the wider market as well, jumping nearly 60% this year compared to the wider market’s 2% drop.