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Tesla May Buy a Stake in LG Energy Solution, South Korean Sources Suggest

Suppliers often go unnoticed when talking about cars. They are, however, responsible for a considerable percentage of the industry’s production costs. This stands true for both traditional and electric automobiles, and on this occasion, we’ll talk about how important LG Chem is to Tesla.
Tesla Model 3 prototype 14 photos
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You see, the battery is one of the most expensive components of an electric vehicle. The cost per kWh dictates the final price of the car, and LG Chem is one of the top suppliers in this segment because of that. So why is Tesla interested in buying a stake in the battery division of LG Chem – a.k.a. LG Energy Solution?

The Korea Times explains it best. ”Any direct investment will help Tesla purchase qualified batteries without any outstanding risks in terms of supply,” and you definitely need a steady supply of batteries when you’re selling hundreds of thousands of EVs on a yearly basis. For reference, 2019 was a record-breaking year for the Palo Alto-based automaker at 367,500 vehicles sold worldwide.

Tesla had 28 percent of the world’s EV sales in the first half of 2020, hence the pressure to stabilize the supply chain. According to sources in the industry, a stake of 10 percent is enough to put the American automaker in a comfortable position within LG Energy Solution, but still, that is far from the entire picture.

The South Korean company is actively researching nickel manganese cobalt and nickel cobalt aluminum chemistries along with lithium iron phosphate (LFP) batteries. The LFP chemistry may be limited in some respects, but it also has its strong points.

To put it as simply as possible, Tesla relies on a steady supply of LFP batteries because cobalt is hard to mine and often mined unethically. The Model 3 electric sedan already features LFP batteries in China, produced by local supplier CATL. Last, but certainly not least, these batteries have brought the starting price of the Model 3 down to 249,900 yuan as opposed to 271,550 yuan ($36,800 and $39,990).

Otherwise said, Tesla is diversifying its battery chemistries while making sure that the supply chain will be steady for the foreseeable future. Given the partnerships with CATL and Panasonic, buying a stake in LG Energy Solution seems like a forward-looking move for the world's largest and most hyped manufacturer of electric vehicles.
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About the author: Mircea Panait
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After a 1:43 scale model of a Ferrari 250 GTO sparked Mircea's interest for cars when he was a kid, an early internship at Top Gear sealed his career path. He's most interested in muscle cars and American trucks, but he takes a passing interest in quirky kei cars as well.
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