South Korean battery-maker LG Energy Solution (LGES) is in talks with about three mainland Chinese suppliers to scale up the production of low-cost electric vehicle batteries for its customers in Europe, according to a news report published by Reuters on July 24.
The news report cited a senior executive, Wonjoon Suh, who leads the battery division at LGES. Suh told Reuters that LGES is having talks with mainland Chinese firms who will work together to develop and produce lithium iron phosphate (LFP) cathodes for Europe. Notably, cathodes are the most expensive component of an EV battery, accounting for almost a third of the total cost of a battery cell.
According to the report, LGES is evaluating various measures, including setting up joint ventures and signing long-term supply deals that would help the largest South Korean battery-maker lower its LFP battery manufacturing costs to match that of its mainland Chinese rivals in three years.
He, however, did not name the companies from mainland China.
Earlier in July, French carmaker Renault had announced its plan of building an LFP battery supply chain in Europe with the help of LGES and its mainland Chinese rival CATL.
LGES' potential partnerships with undisclosed mainland Chinese companies come at a time when global EV industry is witnessing a slowdown and non-Chinese battery manufacturers are seeing a growing pressure from the automakers to bring down the cost of producing EVs.
Mainland China dominates in global LFP cathode supplies with Hunan Yuneng New Energy Battery Material, Shenzhen Dynanonic and Hubei Wanrun New Energy Technology among its biggest producers, the Reuters report pointed out.
It further added that while the South Korean battery companies have traditionally focused on producing nickel-based batteries, they are now expanding into LFP battery production, due to the mounting pressure from automakers who are demanding supply of low-cost batteries to bring overall EV costs down.
Suh told Reuters that LGES is considering three locations — Morocco, Finland and Indonesia — to produce its LFP cathodes along with the potential partner from mainland China.
Moreover, LGES is known to have been discussing the LFP battery supply deals with automakers in the US, Europe and Asia. That said, Europe has a stronger demand for affordable EV models, the LGES executive told the media publication. LGES has existing battery JVs with General Motors, Hyundai Motor, Stellantis and Honda Motor in the US.
Suh expects that the EV demand would recover in about 18 months in Europe and in about two to three years in the US, the report said.
