South Korean battery giant LG Energy Solution (LGES) is exploring the potential of partnering with Chinese suppliers to deliver low-cost electric vehicle batteries for the European market, Reuters reported, citing a senior executive.

LG eyes Chinese partnerships for EU battery market

LGES is currently in discussions with three Chinese suppliers to aid its planned production of cheaper electric vehicle batteries for Europe, according to the company’s head of the advanced automotive battery department.

The move is a strategic response to the EU’s newly announced tariffs of up to 38% on Chinese electric vehicles, aiming to bolster its competitiveness in the increasingly challenging market.

LGES aims to utilize China-made LFP cathodes to produce low-cost battery cells for Europe, potentially under new joint ventures or supply agreements.

“We are having talks with Chinese firms who will develop LFP cathode with us and produce them for Europe. We are considering various measures, including the establishment of joint ventures and signing long-term supply deals.”

Wonjoon Suh, head of the advanced automotive battery department at LGES

Suh further revealed that the company is currently eyeing three locations to produce the LFP cathodes with its potential Chinese partners, including Morocco, Finland, and Indonesia.

These possible alliances with Chinese companies can help alleviate the intensifying pressure on LGES to cut costs and match those of Chinese competitors in three years, per the company’s executive.

Cost reduction strategy

The cathode is reportedly the “single most expensive” material of an electric vehicle battery, which accounts for approximately one-third of the total cost of a battery cell.

European automakers are increasingly demanding more affordable LFP cells to be able to lower their electric vehicles’ prices and remain competitive in the rapidly growing market.

LGES, like most South Korean battery cell manufacturers, has focused on nickel-based battery chemistries so far. Now, it is exploring cheaper LFP cells with potential help from Chinese suppliers to meet European automakers’ demand.

Nickel-based cathodes are costly but can store more energy, resulting in more extended driving ranges. In contrast, LFP cathodes can keep less energy but are less pricey and more abundant in supply.

Expansion push

As part of its global expansion efforts, LGES has also been negotiating LFP battery supply deals with numerous automakers in various regions like the United States and Asia. However, Europe reportedly has a higher demand for affordable EVs.

Many global automakers suffer from the waning demand for electric vehicles, primarily due to high prices. There is a general consensus that today’s customers now prefer lower-cost models amid the increasing interest rates. As per the report, European customers’ demand for cheaper EVs surpasses the US.

LGES’ pivot to more affordable LFP batteries for Europe through potential Chinese partnerships is no longer surprising, considering that China currently dominates LFP cathode supplies across the world. It is indeed a crucial move to maintain its competitiveness in the electric vehicle battery market, potentially attracting new clients seeking to lower the prices of their EV offerings.