LG Chem begins production of high-nickel batteries in Nanjing, to supply domestic Tesla

According to the latest news from foreign media, LG Chem, one of the world's lithium battery manufacturing giants, has begun mass production of 21700 lithium batteries used in Model 3 at its factory in Nanjing, China.

Tesla has reportedly listed LG Chem as one of the battery suppliers for its Shanghai electric vehicle factory. Before signing the contract with Tesla, LG Chem used its NCM 811 batteries for electric buses, and the Model 3 is the first sedan to use these special batteries. Industry insiders said that LG Chem was able to convince Tesla to choose its NCM 811 batteries because the company guaranteed that these batteries would maximize the range of the Model 3.

This is critical for Tesla's Model 3 production in its factory in Shanghai, China. In this factory, Tesla only plans to produce the mass-market Model 3 (that is, excluding the other two luxury electric vehicles, Model X and Model S). Therefore, if Tesla can prove to Chinese consumers that the locally produced Model 3 can have an industry-leading range, this model will be welcomed and purchased by consumers in the Chinese market.

With Tesla becoming a customer of its Nanjing plant, LG Chem has reportedly begun preparing production facilities to best meet the electric car maker's needs.

LG Chem's factory in Nanjing is already operating at a high level, and earlier this year the South Korean conglomerate announced it would invest 1.2 trillion won ($1 billion) to further expand the factory's production capacity. But that's not all, more battery capacity expansion is expected based on Tesla's requirements.

Interestingly, South Korean tech media cites industry insiders as saying that LG Chem is also looking to mass-produce NCMA electric vehicle batteries starting in 2022. These upcoming batteries will reportedly have a higher nickel content.

Reports of LG Chem's collaboration with Tesla first emerged last August, when a US financial media outlet reported that the battery maker and the electric car company were discussing a potential partnership. If recent reports from South Korea are accurate, the collaboration between the two companies appears to have been secured, and the two companies appear to be working together to lay the groundwork for Model 3 production at the Shanghai factory.

LG Chem's Nanjing battery plant is strategically located. The plant is located about 320 kilometers west of Shanghai, which will make it a fairly simple task to transport batteries to Tesla's Gigafactory in Shanghai's Lingang Industrial Zone.

First, the distance between the two factories in China is much shorter than the distance between Tesla's lithium-ion battery factory in Nevada (which produces 2170 batteries for the Model 3) and the Fremont factory in California where the car is assembled.

Other media reports also indicate that Tesla's Shanghai electric car factory will not be fully supplied with lithium batteries by LG Chem. In addition to the Korean battery manufacturer, Tesla is reportedly considering Chinese local lithium battery manufacturer CATL as another supplier.

So far, neither Tesla nor CATL has confirmed that it has established a battery partnership for the operation of the Shanghai electric vehicle factory.

As we all know, in terms of lithium battery production and supply, Tesla's largest partner is Japan's Panasonic. The two companies jointly operate a lithium battery factory in Nevada. However, various signs indicate that there are some problems or disagreements in the cooperation between the two companies. To date, the construction of the Nevada lithium battery factory has not been completed and the production capacity has not reached the planned level. It is reported that Panasonic believes that the demand for lithium batteries from Tesla is insufficient, so it has not actively expanded its production capacity.

Last year, Panasonic also stated that with the production of Tesla's electric vehicle factory in Shanghai, China, Panasonic and Tesla could also jointly produce batteries in China.