Tesla China Demand Continues to Skyrocket, So Battery Partner LG Chem Will Double Production Capacity

LG Chem plans to more than double its battery cell production capacity in China in 2021 in order to meet Tesla’s growing demand, sources told Reuters. In addition to supplying battery cells to Giga Shanghai, LG Chem will supply its products to Tesla factories in the US and Germany.

Tesla is a major customer of LG Chem, so the company is looking to increase the production of battery cells for the California-based manufacturer, whose electric vehicle demand is growing rapidly.

LG Chem has already added production lines in South Korea this year, mainly to meet demand from Tesla’s US plant, sources said. Earlier, Tesla asked Panasonic to supply battery cells to their Shanghai factory, the source said.

“Tesla simply doesn’t have enough battery cells,” said the person. “So LG Chem is going to more than double China output.”

“We’re continuing to expand capacity for cylindrical battery cells in response to growing demand from automakers but we can’t comment on specific customers,” an LG Chem spokesman said. And LG Chem said it will triple the capacity of its cylindrical cells to 60-gigawatt hours by 2023.

LG Chem is investing $500 million over the next year to increase annual production capacity for 21,700 cylindrical battery cells–the type Tesla is currently using–at its 8 GWh plant in Nanjing, the local government said last week.

Sources told Reuters that the plan calls for increasing the number of production lines to at least 17 from 8.

LG Chem and CATL are now supplying battery cells for the China-made Tesla Model 3. Also, LG Chem will initially be the only supplier for the made-in-China Model Y, which is slated for production in early 2021, one source said. Each model uses 4,416 battery cells, and each LG Chem line is capable of producing up to 7 million cells per month, one source said. Thus, according to Reuters calculations, 17 LG Chem production lines in Nanjing will be able to service up to 323,000 vehicles per year.

China’s LG Chem plant will also initially supply batteries for Tesla vehicles in Berlin, once production starts there, the source said.