Tesla has reportedly confirmed a $5 billion order for electrodes with LG Energy Solution, marking a strategic shift towards in-house battery production.
The order, covering a substantial volume sufficient for approximately 1.3 to 1.4 million electric vehicles, underscores Tesla’s transition to self-manufacture batteries, addressing around 70% of its annual production volume based on last year’s figures, reports Naver (via @Tslachan).
Industry insiders reveal the deal is in its final negotiation stages, with supply expected to commence next year and extend over six to seven years, aligning with Tesla’s product refresh cycles. This move is interpreted as Tesla’s commitment to internalize battery cell production, leveraging electrodes – a critical component in battery manufacturing.
Experts suggest this strategy could significantly enhance Tesla’s competitive stance against the influx of affordable electric vehicles from China. Reducing battery costs, which account for 30-40% of an electric vehicle’s production cost, is crucial for maintaining price competitiveness.
Gwangjin Park, a professor at Gachon University’s Department of Battery Studies, highlighted the strategic importance of this transition. “Starting with electrodes, Tesla seems to be gradually moving towards full internalization of the battery production process,” he mentioned.
The collaboration with LG Energy Solution also presents an opportunity for the Korean company to utilize its surplus inventory amidst a challenging market environment. Additionally, LG Energy Solution is considering expanding its electrode manufacturing capabilities with new facilities abroad, including Poland, in anticipation of the deal.
This partnership positions Tesla uniquely among global automakers, emulating China’s BYD in encompassing battery development, design, and production entirely in-house, thereby securing a vital edge in the competitive electric vehicle market.
