The statistics in the shipment of lithium batteries during the first quarter of 2020 revealed that LG Chem has become the new champion by surpassing Tesla’s good partner Panasonic, and the key factor lies on the demand for batteries from Tesla’s China factory.
Major Korean battery manufacturer LG Chem surpassed Panasonic on the shipment ranking of lithium battery during the first quarter of 2020 by a production of 6.385 GWh, and the reason behind the turn of events comes from the vigorous demand of Tesla’s super factory in Shanghai.
Tesla China had produced 88,461 units of electric cars (Model 3) during the first quarter, of which 14% of the battery was provided by LG Chem, and the remaining 86% was supplied by Panasonic as usual.
▲LG Chem has surpassed the 1 GWh achievement by Panasonic, CATL, Samsung SDI, BYD, and AESC. (Source: ev-volumes)
Initially the designated battery supplier of Tesla, Panasonic had even invested a significant amount in the R&D for the provision of the nickel cobalt aluminum oxide (NCA) lithium battery specifically used for Tesla, which had caused a cash flow problem for the former. Panasonic expressed last year that the company will not establish another production line for Tesla’s Shanghai factory, which in turn provided a golden opportunity for LG Chem.
The nickel cobalt manganese (NCM811) battery produced by LG Chem in Nanjing has a higher cost than NCA, though the closer production location has replenished the disadvantage. This is also the first time for Tesla using a battery system apart from NCA, which means that Panasonic has not only been deprived of an exclusive provision, but also an exclusive product.
For Panasonic, the two major pillars for the battery supply chain come from Tesla and Japanese automotive manufacturers including Toyota and Honda, though these Japanese manufacturers have been rather conserved in the promotion of electric vehicles, and Tesla has been implementing autonomous R&D on battery while also working with Chinese battery powerhouse CATL on developing batteries that contain no cobalt. Once the orders from Tesla have been stripped away, it will not only look bad for Panasonic on the book, but the heavily invested technology and production line over the past few years will also incur significant losses.
Panasonic only produced a surplus during the 4th quarter of 2019 since working with Tesla from 2014, and the former is continuing on the expansion of its US production line’s production capacity, which is expected to yield a remarkable result in 2020 from the popular demand for Model Y. However, it is uncertain if such momentum will carry onto 2021.
In contrast, LG Chem has been implementing a diversified strategy. As one of the long term primary suppliers in the Chinese electric vehicle market, the company also worked with General Motors last year on establishing a new company that is specifically used for the production of automotive batteries, and the profound sales of Tesla China has facilitated a relatively positive outlook on short to mid-term development.
CATL is not to be sniffed at despite its trailing outcome in the first quarter. The company has been conducting R&D on batteries containing no cobalt for the past two years, for which a successful production will substantially reduce the current battery cost and further promote the sales of electric vehicles, where its foundation supported by the enormous domestic market and European automobile manufacturers guarantees the company’s competitiveness in the future.
(Cover photo source: LG Chem)