In a groundbreaking shift within the electric vehicle (EV) industry, Tesla is reportedly on the verge of clinching a monumental electrode supply agreement with South Korea's LG Energy Solution (LGES). This pivotal move is not merely a procurement strategy but a declaration of Tesla's ambitious vision to dramatically scale its EV production capabilities, signaling a deeper drive towards self-reliance in battery manufacturing.
Industry insiders have shed light on this colossal transaction, suggesting that Tesla has earmarked approximately six trillion won ($4.4 billion) for electrodes from LGES. This investment is aimed at fuelling the production line of an estimated 1.3 to 1.4 million Tesla EVs. Seemingly, Tesla has already initiated the order, with the finalization of this contract anticipated in the latter half of the year.
The Strategic Depth of the Deal
"Tesla's purchasing team recently placed a six trillion won order for electrodes from LG," disclosed a source close to the negotiations. "While detailed discussions are in progress, a contractual agreement is expected to manifest by the second half of this year."
This substantial electrode order from LGES could potentially account for around 70 percent of Tesla's projected production volume for 2023, which surpasses 1.8 million units. This strategy marks a significant transition for Tesla as it gears up to kickstart its in-house battery production on a grand scale.
"Supply is slated to start next year and is projected to span 6 to 7 years, aligning perfectly with Tesla's vehicle facelift cycles," the insider added. This strategic partnership not only ensures a steady supply of vital components but also underscores Tesla's transition towards internalization of its battery production pipeline.
The Broader Implications
In a landmark announcement earlier this year, LGES's CEO, Kim Dong-myeong, revealed plans to start manufacturing Tesla's cutting-edge 4680 battery cells. This production will take place in LGES's Ochang factory located in North Chungcheong Province, South Korea, prior to the establishment of a new LGES factory in Arizona, USA.
Simultaneously, Tesla is making strides in setting up its lithium refinery and plant in Robstown, Texas, with aspirations to churn out 50 GWh of battery-grade lithium annually. Furthermore, LGES is enhancing its lithium supply chain in North America through strategic partnerships aimed at bolstering its capacity to assemble IRA-compliant batteries.
This burgeoning partnership between Tesla and LGES is not just a business deal; it's a strategic alignment that is set to redefine the boundaries of EV battery production and supply. It encapsulates Tesla's forward-thinking approach to secure its supply chain, innovate in battery technology, and propel the global transition to sustainable transportation.
As the EV domain continues to evolve, such strategic partnerships are pivotal for accelerating the transition to electric mobility. Tesla's potential deal with LGES exemplifies how collaboration and vision can foster innovation and drive the automotive industry towards a greener, more sustainable future.
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