Tesla in running to buy stake in LG Chem’s battery division

Following the news that LG Chem operating profit for the third quarter is heading for a record high;

Mike Vousden, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:

“South Korea-based LG Chem has recently overtaken China’s CATL and Japan’s Panasonic to become the world’s largest supplier of lithium-ion batteries for electric vehicles (EVs).

“Moreover, its order books have been heavily bolstered by supply agreements with the likes of Geely, Tesla’s Chinese factory, and GM as the co-developer of its new Ultium range of batteries. The battery division claims to have around five years’ worth of orders on its books.

“LG Chem recently announced plans to spin off the EV battery business, a move that would bring in more funds for capital expenditure. LG Chem predicts the business will generate around US$26bn of annual revenue by 2024, mainly from the rapid growth in demand for electrified vehicles ahead.

“Tesla could well be interested in acquiring a proportion of the LG Chem EV battery operation.

“Tesla has made no secret of its ambition to produce its own battery cells fully in house as a means to drag costs down, as already evidenced by its move away from being fully supplied exclusively by Panasonic.

“A move for a big stake in LG Chem would also fit Tesla’s strategy of seeking greater vertical integration as it seeks to bring more of the electric vehicle supply chain in-house, rather than outsourced to external suppliers.”

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