LG benefits from China’s Model 3 policy
The inclusion of Tesla Model 3 produced in China in the government’s funding list has had a positive cascade effect for LG Chem. Tesla is apparently relying on LG Chem for batteries, and this will be the first electric car with batteries from a Korean manufacturer to be included in the coveted Chinese subsidy list for the first time since 2016.
With its inclusion on the subsidy list, Tesla has not only received a promise from the government that the locally manufactured Model 3 is eligible for subsidies, but also that it still has outstanding permission to sell the vehicles. Until now, Tesla had only received approval for production.
The fact that LG Chem will be supplying the batteries for the vehicles built in the Gigafactory 3 near Shanghai is still not officially confirmed, but extremely likely. A number of news agencies reported on the fairly advanced negotiations in the summer. Most recently, Panasonic, as the battery supplier for the Tesla vehicles built in the USA, had also indicated Tesla’s decision to choose LG Chem as battery supplier. Panasonic CEO Kazuhiro Tsuga said that it was up to Tesla to decide whether to export battery cells from the Gigafactory 1 in Nevada, which operates jointly with Panasonic, to China for the vehicles produced in the new plant in Shanghai or to use cells produced in China by other manufacturers. “We currently have no plans to set up a production facility in China for Tesla’s Chinese business,” Tsuga said in November.
By 2016, the Chinese government had decided to promote only electric cars with batteries from domestic manufacturers. Model 3 from Chinese production would then use the battery cells of a Korean company, but these were very probably manufactured in China. According to summer reports, LG Chem had rebuilt its Nanjing plant to produce “a different type of car battery”. This would be necessary for a Tesla deal, as LG Chem currently primarily produces flat pouch cells, while Tesla uses round cells. The so-called 2170 cells (21 millimetres in diameter, 70 millimetres long) are currently only used in Model 3 and later also in Model Y. The cells are also used for the production of the new Model 3.
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