LG Energy Solutions aims for economies of scale

LG Energy Solutions

LG Energy Solutions plans to generate economies of scale by aggressively expanding battery production bases in the United States, Europe, and China. By 2023, the company aims to boost annual production capacities for pouch-type and cylindrical electric vehicle batteries to 200 GWh and 60 GWh, respectively. The South Korean company is at the top of the largest battery cell producers for years, and the battery business was recently separated from LG Chem.

LG Energy Solutions as part of LG Chem

LG Chem suppliers pouch type batteries for OEM like Volkswagen, Hyundai Motor, and GM. Assuming an average of 50 kWh for an electric car, the company could potentially supply about 4 million electric vehicles per year. Cylindrical type batteries (round cells) are supplied to Tesla and Lucid Air. The South Korean giant can potentially gain new EV startups as their clients, such as Rivian. With again 50 kWh on average for a battery pack, the cylindrical output would be sufficient to supply 1.2 million vehicles.

LG Energy Solutions is set to build a 140 GWh production base over the next three years starting in 2021. LG’s battery plant in Poland is the world’s largest battery facility with an annual capacity of currently 70 GWh. The battery maker has the option to expand the capacity with increasing demand. In their two Chinese plants in Nanjing, the strategists plan to double the capacity from 16 GWh to 30 GWh by 2023. The additional capacity will be secured by the joint venture with GM, where LG Energy Solutions will supply the cells for the automaker’s electric vehicle portfolio.

The build-up and expansion of battery cell production is investment intensive, which is also a major reason why many OEMs decided against manufacturing the cells by themselves. LG Energy Solution will go public in the future, which could be already happening this year in 2021. The company is expected to be worth more than 50 billion USD.

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