Signed contract with Tesla factory LG Chem expects battery revenue to double by 2025

Image source: LG Chem

According to foreign media reports, while the epidemic has hit demand for electric vehicles this year, South Korea’s LG Chem expects its battery sales to reach new highs, mainly due to strong demand in the European market and contracts with Tesla factories.

LG Chem CEO Hak Cheol Shin said in an interview that the company's operating income is expected to reach 13 trillion won (approximately US$11 billion) this year and 30 trillion won in 2025. Xin Xuezhe said: \"Although the epidemic is spreading, our supply chain has no problems and can supply products for all customer orders.\"

Although battery demand may decline for the first time in 2020, Korean battery manufacturers still achieved profitability in the first half of the year. According to SNE Research, a power battery research organization, South Korean battery manufacturers achieved profitability during the epidemic, mainly due to the European government's allocation of part of the economic stimulus plan to increase the sales of electric vehicles and new vehicles of car companies such as Volkswagen. The agency also said that rising demand for Tesla Model 3 sedans and Renault Zoe small cars in the Chinese market prompted LG Chem’s sales to jump 83% to 10.5 GWh. This has doubled the company's stock price this year, with a market value of up to 44 billion US dollars, leading the market in the Ningde era.

Hwang Kyu-Won, an analyst at Yuanta Securities in South Korea, said: \"The important thing is how many orders LG Chem will get from Tesla, because it is well known that Tesla is the leader in the electric vehicle market. However, if there are other car manufacturers The fact that companies can go hand in hand with Tesla is also good for LG Chem because it can diversify its customers.\"

Tesla's Shanghai plant is also using lithium-ion batteries from Japan's Panasonic. CATL recently reached an agreement with the plant to provide Tesla with batteries. BloombergNEF claims that the cost of these batteries is about 20% lower than rival products.

LG Chem’s batteries use lithium nickel manganese cobalt (NMC), which has high energy density and higher prices, but have a longer service life; CATL batteries use lithium iron phosphate (LFP), which is cheaper but lower in density. Mark Newman, a senior analyst at the research institute Sanford C. Bernstein., said that although LFP batteries may be \"good enough\" for driving distances of less than 300 kilometers, NMC may be more appropriate in the long run because it can reduce At the same time as the cost, the energy density is increased at a faster rate.

No matter which technology is better, low prices are the key to consumers who want to switch from internal combustion engine vehicles to electric vehicles. According to Bloomberg New Energy Finance, battery costs account for 25% to 40% of the total production cost of electric vehicles. It is expected that in the next few years, under the pressure of the auto industry to reduce costs, this ratio will drop to 20% or less.

It is reported that LG Chem has reduced daily management expenses (or more than US$2 billion) by building electric vehicle battery plants with GM and Geely Auto. Such cooperation puts the company in a good position to benefit from the eventual rebound in demand for cars, as well as from the increasing popularity of electric vehicles.