Andrew Miller in London
LG Chem, one of the world’s leading battery producers, has struck an agreement to supply lithium-ion packs into China’s burgeoning industry, which is expected to see orders exceed 200,000 by 2017 – twice the capacity of the megafactory the company is constructing in Jiangsu province.
It follows a series of similar agreements with Chinese automotive manufacturers that are eager to secure supply chains as the country’s push towards green energy initiatives continues.
Since 2011, South Korea-based LG Chem has agreed deals to supply EV batteries to some of China’s biggest automotive players, including SAIC Motors, Qoros Automotive, FAW Group and Changan Automobile Group. The deal with Great Wall Motors will see LG Chem’s battery sales into the country’s EV sector exceed 200,000 units by 2017, when the company is set to begin sales of its new electric SUV range.
This will coincide with a ramp up in production from LG Chem’s new battery plant in Nanjing, slated for start-up in Q1 2016.
Forecasts from IHS suggest Chinese EV sales could exceed 650,000 vehicles by 2020, meaning LG Chem could feasibly supply batteries to over 30% of the market by this time.
In addition, the company already has contracts in place with major western car producers such as General Motors, Volkswagen, Ford Motor Co and Audi AG to name a few, and in March 2015 agreed to supply batteries to Germany’s Daimler AG.
US to reopen battery plant
With an expected increase in EV battery demand in North America, LG Chem is already preparing to reopen a battery plant in Michigan.
This will supply companies including Chevrolet, which will use the batteries for the next generation Volt and the soon to be released Bolt – the company’s first low-cost vehicle which will compete with Tesla’s Model 3.
While competitors such as Tesla Motors may be making the headlines in the battle for battery dominance, LG Chem has continued to strengthen its foothold in the lithium-ion storage surge.
Leading megafactory charge LG Chem’s plans to create an EV plant in China were unveiled in Q4 2014 and the company has already made significant progress in the construction of a 7GWh facility in Nanjing, China.
It is set to bring the first of the lithium ion megafactories on-stream, ahead of Tesla Motors’ Gigafactory project in Nevada, which will begin production in 2016.
The construction of a plant in China is a strategic move by the Seoul-based company, which is already among the world’s leading lithium ion battery producers.
Production within China will give LG Chem further leverage in the fastest growing market for EVs and allow it to supply batteries at a more competitive price as the race to a production cost of under $250/kWh intensifies.
Polices to boost EV sales in China have also escalated as the need for environmental controls has grown, increasing momentum towards a low carbon economy.
Beijing has committed significant capital investment into developing
domestic EV production capabilities and building the necessary charging infrastructure to facilitate greater sales.
In addition, the 10% tax on new vehicle sales has been waived in an effort to accelerate the uptake in cleaner energy transportation.
As a result, China has become a market leader in the adoption of EVs, outpacing developments in the US and Europe.
Increasing demand, particularly from the automotive sector, could see LG Chem commit to further battery expansions in the near future, with Chinese orders already doubling the new plant’s production capacity of 100,000 units.
The coming year will subsequently be crucial in laying the necessary foundations to supply major EV growth out to 2020.
It is also expected to see greater volumes of battery raw materials be consumed within China, which will limit supply to international markets, particularly for materials such as spherical graphite which, in its uncoated form, is produced almost exclusively within China.
China is a net importer of battery-grade lithium chemicals, while it sources the majority of its cobalt concentrate from the Democratic Republic of Congo for domestic chemical production.