On Wednesday local time, South Korea's LG Chem announced that it had signed an agreement worth 25 trillion won (approximately US$18.8 billion) to supply electric vehicle battery cathode materials to General Motors from this year to 2035. According to the long-term supply contract, LG Chem will supply more than 500,000 tons of cathode materials (including nickel, cobalt, manganese, and aluminum) to General Motors from 2026 to 2035. LG Chem believes that the estimated total amount of cathode material will be enough to produce batteries for approximately 5 million high-performance electric vehicles.
It is reported that these materials will be produced at LG Chem’s plant under construction in Tennessee to strengthen cooperation with General Motors in the North American market.
At the end of last year, LG Chem broke ground on its factory in Tennessee, which will have an annual production capacity of 60,000 tons from 2026. In addition, LG Chem also plans to improve the production competitiveness of the Tennessee plant and ensure that the annual production capacity of each production line reaches 10,000 tons, reaching the highest level in the world.
In fact, as early as July 2022, the two parties had reached a comprehensive agreement on the long-term supply of cathode materials, but there were no details on price or production location. The supply contract reached this time further strengthens the cooperation between the two companies.
However, automakers such as General Motors have been cutting costs or delaying plans as the adoption of electric vehicles has been slower than expected. GM had previously abandoned its electric vehicle production target, citing signs that the surge in consumer demand for electric vehicles in recent years has slowed.
"This contract builds on GM's commitment to building a strong, sustainable electric vehicle battery supply chain to support our rapidly growing electric vehicle production needs," said Jeff Morrison, GM's vice president of global procurement and supply chain.
The deal also shows that GM remains committed to the development of electric vehicles, but the longer-term contract means that the company is adjusting its plans to cope with lower penetration of electric vehicles than previously expected.
In recent years, General Motors has focused on pure electric vehicles and has largely not considered hybrid vehicles. Hybrid vehicles pair an internal combustion engine with a small battery and electric motor to improve fuel efficiency.
But dealers say they worry more and more customers will be looking for a middle ground between traditional gasoline cars and electric vehicles, which are more expensive and require regular charging.
Late last month, General Motors announced it would launch several plug-in hybrid models in North America, a major shift in strategy after years of avoiding the technology in the U.S. market.