Tesla to buy batteries from LG Chem for China Model 3

It appears the rumours were true: Tesla will buy batteries from LG Chem for its electric car production in China. Media agencies cite inside sources confirming the deal that would affect both the Model 3 and future Model Y.

+ + Kindly see our update below + +

Sources of both Bloomberg and Reuters also say this commitment will be limited to the vehicles produced in the Gigafactory 3 near Shanghai. Still, this new deal would be a big step for Tesla, as the Californian company has so far worked exclusively with Panasonic.

Reuters quotes a source according to which LG Chem has already agreed to supply batteries for Tesla’s Chinese plant. However, the source did not explain any details. After a construction period of only seven months, local authorities gave their approval this week for the Model 3 production to start at the Shanghai plant before the end of this year.

According to the report, LG Chem is also converting its battery plant in Nanjing to produce “a different type of auto battery,” as a Tesla deal would indeed require. LG Chem currently primarily produces flat pouch cells, while Tesla exclusively uses cylindrical cells. The so-called 2170 cells (21 millimetres in diameter, 70 millimetres long) are now only used in Model 3 and later also in Model Y.

In order not to jeopardise the start of production at the Gigafactory 3 in China, Tesla could, according to one of the sources, probably use Panasonic cells at first, but later replace them with locally manufactured round cells. Besides LG Chem, CATL has come up in connection to Tesla again and again. The Chinese company quickly gained market share in automotive battery cells, but just like LG Chem, it hardly had any experience with round cells.

Tesla did not reply to a request for a statement from Reuters, while LG Chem and CATL did not want to comment either.

However, the move to include another battery supplier would fit in with the comments made by Elon Musk, who had announced a diversification of supply sources. Besides, there were repeated rumours of Tesla producing its own battery cells, last fired by Musk during the conference call to announce the latest quarterly figures. Further details will be provided at a “Battery Day” this autumn. Despite the now in-house battery research with Maxwell Technologies, the continued cooperation with Panasonic will certainly not harm to guarantee the supply of battery cells for other plants on other continents.

Update 24 September 2019: In the meantime, rumours circulating since August about a battery cell deal between Tesla and LG Chem in China have been intensifying: According to a report of the Korean news site The Elec, LG Chem has started the production of battery cells for the Model 3 produced by Tesla in the Gigafactory 3 near Shanghai at its plant in Nanjing, China. This apparently concerns 21700 cells, the same format Tesla uses for its Panasonic cells for Model 3. In its cells for Tesla, LG Chem uses NCM-811 chemistry, i.e. 80 per cent nickel and 10 per cent each cobalt and manganese. According to the report, at the request of Tesla, LG Chem is now preparing an expansion of its production lines at its battery plant in Nanjing.

bloomberg.com, reuters.com, thelec.kr (update)