By Kim Yoo-chul
Staff Reporter
LG Chem has just added Volvo to its list of customers for batteries for its planned electric vehicles (EVs).
On Monday, the South Korean supplier said it was chosen by Volvo for the provision of its lithium-ion polymer battery packs.
LG Chem spokesman Song Choong-sup said the focus of the partnership is cooperation in the development of next-generation technology for use in hybrids and EVs.
Analysts and industry officials say the deal will last for at least three years from 2011, while the total value is estimated at "a few billion dollars."
LG's Song didn't provide any specific financial details.
The deal confirms LG Chem's high standing among battery makers for hybrid electric vehicles (HEVs), now a key part of automakers' line-ups in response to tighter emission standards.
Volvo is pushing for its clean-energy car programs to explore its business opportunities in both emerging and developed markets.
Song said the deal will pave the way for the company to clinch more such deals in the future. LG Chem, which has already inked deals with six global auto-related makers, including General Motors and Hyundai-Kia Motors, appears close to securing more lithium-battery contracts.
There have been rumors that LG Chem will form additional partnerships with Ford of the United States and Volkswagen of Germany for their planned future cars.
"We are positive on increasing our number of overseas clients by 10 within this year, in supplying lithium batteries for the use in eco-friendly cars," Song said. The official, however, declined to name the potential clients.
Initially, the biggest hurdle for EVs are the prohibitive prices. Like many new technologies, the first models are expensive, effectively limiting the customers to governments, businesses and innovation fans.
Despite this, companies are heavily investing time, energy and money into producing EVs.
Volvo is just one of them. Audi, Nissan, Mitsubishi, Toyota and Holden are all lining up to join the electric race, and even Porsche and Mercedes-Benz have EVs in the pipeline, giving the uprising momentum for LG Chem's battery business.
The company is planning to invest over 50 billion won for research and development (R&D) in car batteries alone. It has been set to hire 400 research-related staff members as a back-up move, according to the company.
Even in the domestic market, LG Chem has teamed up with Hyundai Mobis ― a parts supplier to Hyundai-Kia Motors ― to work at the EV battery joint plant in Uiwang, near Seoul.
Last week, LG Chem reported that its first-quarter profit rose 73 percent to 517.7 billion won after the global economic recovery boosted prices of materials used in plastics and synthetic fabrics. Sales, including those of overseas affiliates, increased 32 percent to 4.42 trillion won.
"A steady growth in its petrochemical business and a stable path for its battery business helped by governments' green initiatives are making LG Chem shares lucrative," Lim Ji-soo, an analyst at Shinhan Investment, said, adding the local brokerage has revised up its target price for LG Chem to 342,000 won.