Partnership Discussions with Chinese Suppliers
LG Energy Solution (LGES) is actively engaging in talks with three Chinese material suppliers to produce cost-effective electric vehicle (EV) batteries for the European market. This initiative is in response to the European Union Commission’s recent imposition of additional tariffs, which can reach up to 38%, on imported EVs made in China.
Strategic Measures and Potential Locations
“We are in talks with Chinese companies to develop and produce LFP cathodes for Europe,” said Wonjoon Suh, head of LGES’ advanced automotive battery division. “We are considering various measures, including forming joint ventures and signing long-term supply agreements.”
To support this collaboration, LGES is evaluating three potential production locations: Morocco, Finland, and Indonesia.
Supply Deals Across Multiple Regions
LGES has been negotiating LFP battery supply deals with numerous automakers across various regions, including the United States, Europe, and Asia. EV battery cathodes are typically either nickel-based or made from lithium iron phosphate (LFP). Nickel-based cathodes store more energy and offer longer EV ranges but come at a higher cost. In contrast, LFP cathodes are less expensive and more environmentally abundant, though they store less energy.
Market Demand and Investment Adjustments
The high cost of EVs is currently dampening demand among many automakers, with a broad consensus that consumers are seeking more affordable electric vehicles. According to Reuters, Europe’s demand for budget-friendly EV models exceeds that of the United States.
In response to the global slowdown in EV demand, LGES is adjusting its investment strategies. Recently, LG Energy Solution and General Motors’ joint venture announced a slowdown in the construction of their third battery plant in Michigan, USA. Suh anticipates that LGES might delay its expansion plans in the United States by up to two years. However, he predicts that the demand for EVs in Europe will start to recover within the next 18 months.
Must read our other posts on batteries as well. Thank you.