LG monitoring Tesla's plan to manufacture batteries
The gigafactory of electric carmaker Tesla is seen in Shanghai, China, in this file photo, Tuesday. Reuters-Yonhap
By Kim Yoo-chul
LG Chem said Tuesday it was “closely monitoring” activities by “a number of companies” including Tesla, which aim to develop their own batteries, as this would impact the firm's battery business.
“As demand for batteries for electric vehicles (EVs) is rising, some companies inside the battery industry are aiming to develop their own batteries. LG Chem is closely monitoring updates, activities and looming trends in the market we are deeply involved in,” the company told investors upon announcing its first-quarter earnings results. LG is the global leader in battery cells and packs, supplying them to the world's leading carmakers.
While LG Chem is leading the global EV market, Tesla's entry, if it actually happens, will have a greater impact on the overall battery supply chain management (SCM) given Tesla's ongoing and expected outperformance in terms of profits and sales, in addition to the growing reflection of the change in people's mentality regarding EVs.
Tesla CEO Elon Musk earlier outlined his company's plans for battery development for future vehicles and energy sources. Musk stated he will review Tesla's cell chemistry, module, pack and architecture and its manufacturing plan that will detail how it can reach a terawatt-hour per year of battery production. Tesla is currently dependent upon Japan's Panasonic in procuring batteries for its EVs.
During the call, LG Chem remained positive on the outlook of its China battery business, thanks to Beijing's recent announcement to extend government subsidies by two years until 2022, as well as multiple local governments offering additional subsidies for EV use and purchases.
“LG Chem considers such measures as positive. Recently, vehicles using LG batteries were chosen to receive subsidies from the Chinese government. We are seeing eased discriminatory measures, there, against foreign vehicle original equipment manufacturers,” it said.
Multiple provincial and municipal governments have responded quickly to Chinese President Xi Jinping's call to stabilize car purchases with local car stimulus policies, according to recent analysis by Fitch Ratings. “In the short term, because of the spread of the COVID-19, LG had to delay the expansion of our factories in China. But LG Chem's plan to expand the battery output to 100 gigawatts per hour by the end of this year and 120 gigawatts per hour next year hasn't been changed.”
LG Chem's net profit for the first quarter this year was down 83 percent, year-on-year, mostly due to currency-related losses. Net income during the quarter came in at 36.3 billion won or $30 million, while sales rose 7.5 percent year-on-year to 7.11 trillion won. Its battery unit suffered an operating loss of 51.8 billion won on sales of 2.26 trillion won due to new investments in EV batteries and the suspension of plants over the COVID-19 pandemic.