The two largest EV battery producers in the world, as I recently reported, are CATL and LG Energy Solution (formerly LG Chem). They intend to stay at the top. On the last day of 2020, CATL announced a 39 billion yuan ($5.9 billion) investment into three new battery factories in China. LG Energy Solution, meanwhile, plans to more than double its battery cell production in China.
New CATL Factories
The three new factories will be build in the provinces of Fujian, Sichuan, and Jiangsu. “Industry experts said that its capacity expansion will enable other supply chain companies in the new energy vehicle sector to boost output and cash in on the rapid growth of the new energy vehicle sector in the country over the next few years,” China Daily notes. Battery materials like lithium and cobalt are already mostly processed and sourced in China. Scaling up battery cell production, logically, means an increase in production within that supply chain, and probably growing global imbalance — a topic I’ve discussed with experts from RK Equity as well as other battery experts (episodes not yet published).
The new investments are expected to add 120–150 GWh of battery production capacity in the next 2–4 years according to China International Capital Corp analyst Zeng Tao.
“CATL has spent 73 billion yuan, according to public announcements, for capacity expansion this year,” Zeng added. Here are a few more details on the investments:
- 17 billion yuan for battery production base in Fuding of Ningde, Fujian province.
- 12 billion yuan for factory in Liyang, Jiangsu province.
- 10 billion yuan to expand battery production plant in Yibin, Sichuan province.
Wang Jing, a research supervisor for high-end manufacturing at Shanghai Chaos Investment Group Co Ltd., added the following: “CATL is looking to speed up its capacity expansion with an eye on growing its global market share to 40 percent. Given its insufficient production capacity currently, the battery maker is planning ahead for a boom in new energy vehicle sales.”
LG Energy Solution Expansion
LG Energy Solution’s news came approximately a month earlier, when LG Energy Solution was still just LG Chem.
South Korea’s LG Chem plans to more than double production capacity of battery cells it makes in China for Tesla’s electric vehicles next year, sources said, to keep up with its U.S. client’s growth in the biggest car market
— JPR007 (@jpr007) December 1, 2020
Reuters reported that LG Chem was planning to double its China EV battery production in 2021, mostly to satisfy Tesla’s demand for more batteries for its made-in-China electric vehicles. Most of LG Chem’s battery production is in its home country of South Korea, but it also owns and operates the largest EV battery production facility in Europe. It does not supply Tesla with any of the batteries produced there, but perhaps it will when Tesla Giga Berlin goes online — the two factories are just a couple hours apart by car.
For the time being, though, LG Energy Solution “will also ship its increased output from China as well as Korea to Tesla’s factories in Germany and the United States, said two people with knowledge of the matter, signalling an increased role in the supply chain of the world’s leading EV manufacturer,” according to Reuters. By 2023, LG Energy Solution is planning to triple production capacity of cylindrical battery cells to 60 GWh a year. So far, it’s just Tesla that uses that kind of battery cell.
Tesla sold 500,000 electric vehicles in 2020, but intends to scale up production to 20 million vehicles a year before 2030. Yes, 20 million a year. The top selling automaker in the world in 2017 was Toyota, with 10.2 million sales. Will Tesla be able to reach production of 20 million vehicles a year by 2030? Who knows? But if it does, it will depend heavily on huge and fairly rapid production capacity increases at the world’s top battery production companies.
Tesla’s annual production capacity in Shanghai is now up to 250,000 vehicles. However, by 2022, Tesla’s aim is reportedly to reach a production capacity of 250,000 a year for the Model Y alone. The news outlet added:
“Each model uses 4,416 battery cells, and each LG Chem line is able to produce up to 7 million cells a month, one of the people said. LG Chem’s 17 lines in Nanjing would therefore be able to cater for up to 323,000 vehicles a year, a Reuters calculation showed.”
Reportedly, in addition to getting batteries from CATL and LG Chem in Shanghai, Tesla has asked Panasonic to supply it with batteries for its Shanghai-made electric vehicles. The point is clear: Tesla needs batteries, a lot of them.
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