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Market Cap £18.30bn
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EXCLUSIVE-LG hopes to make new battery cells for Tesla in 2023 in U.S. or Europe -sources

Tue 9th March, 2021 7:22pm
By Hyunjoo Jin
    SAN FRANCISCO, March 9 (Reuters) - LG Energy Solution aims
to build advanced battery cells for Tesla Inc  TSLA.O  electric
vehicles in 2023 and is considering potential production sites
in the United States and Europe, two people familiar with the
matter told Reuters. 
    Tesla has not yet agreed to a deal that would expand LG's
role in its supply chain beyond China, one of the sources said.
    Last week, the Korean battery maker told Korean reporters it
plans to build a U.S. factory where it would make battery cells
for EVs and energy storage systems, to cater to U.S. and global
customers as well as startups. It did not identify potential
customers then, but one of the sources said it was hoping Tesla
would buy the batteries. 
    In September, Tesla Chief Executive Elon Musk announced an
ambitious plan to develop new cells in-house, prompting
suppliers like LG and Panasonic to embrace the unproven
technology or face risks of losing a major customer for the
longer term. 
    The Korean supplier, a unit of LG Chem  051910.KS , has made
samples for the so-called 4680 large-format cylindrical cells,
said the sources, who asked not to be identified. It faces
technological hurdles and the challenge of scaling up
production, people familiar with the matter said.
    "LG plans to produce 4680 cells at its new U.S. factory.
They plan to build a new 4680 cell line to supply Tesla's Giga
Berlin in Europe," one of the sources said, adding Spain is one
of candidate for the European plant. 
    One of the sources said LG has never mass produced such
large-format cylindrical cells, although increasing battery
capacity is the correct call. "Tesla is a major customer, and LG
can take risks," another source said.   
    He said LG has not yet secured orders from Tesla for the
4680 cells, still under development. For now, Tesla is sharply
boosting orders for 2170 cells used in the Model 3 and Model Y
vehicles made in China, the source said.  urn:newsml:reuters.com:*:nL4N2IG1A5    
    LG declined to comment, and Tesla officials could not be
reached for comment.
    Tesla's September plan to develop the new 4680 battery cells
is meant to reduce production costs, improve battery performance
and increase driving range. This would help with Tesla's push to
boost electric vehicle production significantly around the
world.  urn:newsml:reuters.com:*:nL2N2GJ19H
    Tesla is running a pilot factory for the new battery cells
in California, and preparing to build those cells at newer
plants in Texas and Germany.
    Musk said recently Tesla is in talks with battery suppliers
about developing 4680 batteries. He said Tesla will use the
current cells for at least a few years, but will "retire" those
cells over time. 
    LG currently supplies smaller cells to Tesla in China, as
does Chinese battery maker CATL  300750.SZ . Panasonic has
partnered with Tesla in a $5 billion battery "gigafactory" near
Reno, Nevada.
    LG currently has a $2.3 billion joint venture with General
Motors Co  GM.N  in Lordstown, Ohio, to make pouch-type electric
vehicle batteries for future GM electric vehicles.
    GM said separately it is considering building a second U.S.
battery factory with LG.  urn:newsml:reuters.com:*:nL3N2L22R0
    The unusually candid comments from LG and GM came after
another Korean battery supplier, SK Innovation  096770.KS ,
hopes the White House would overturn a recent U.S. trade ruling
favoring LG, saying it threatens to disrupt battery supplies to
Ford Motor  F.N  and Volkswagen  VOWG_p.DE .  
    Tesla rival Lucid Motors, which has a multi-year supply deal
with LG Chem, and is considering whether to make its own cells
in house, said it is interested in different cell formats, Chief
Executive Officer Peter Rawlinson earlier told Reuters.  
    Panasonic plans to start a test line for 4680 cells in Japan
in the business year beginning April 1, according to a person
familiar with the matter. The two companies have not said if
they plan to collaborate on production of the 4680 cells.
    Tesla may need to push out the timeframe for mass
production, or work with partners at its newer plants in order
to get cell production up and running quickly, said Caspar
Rawles, an analyst at researcher Benchmark Mineral Intelligence.

 (Additional reporting by Paul Lienert in Detroit, Tim Kelly in
Tokyo and Heekyong Yang in Seoul; editing by Ben Klayman and
David Gregorio)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))
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