LG Chem gears up to supply new batteries to Tesla; shares surge

Shares of LG Chem Ltd. surged on Oct. 22 as investors snapped up the electric vehicle battery maker on Tesla Inc.’s record quarterly earnings, amid market talk that the South Korean company may supply a new type of batteries to the US EV giant.

LG Chem shares finished up 3.6% – the biggest percentage gain in nearly a month – at 639,000 won on Thursday, outperforming the broader Kospi market’s 0.7% fall.

Market analysts said the stock was boosted by LG Chem executives' comments that the company is working on a new form-factor cylindrical cell, which will boost energy density fivefold and power by sixfold.

Following LG Chem's own record third-quarter results, the world’s largest EV battery supplier announced Wednesday that it plans to triple its production capacity for cylindrical batteries used by Tesla and others. The Korean company said it will raise its current 20 GWh of cylindrical battery production capacity to 60 GWh by 2023.

LG'S NEW FORM FACTOR MATCHES TESLA'S SPECS

Industry watchers say the LG Chem executives’ remarks are indicating that the company is preparing to supply new cylindrical batteries to Tesla, as LG’s projected product improvements match the specifications announced by the US company.

At its Battery Day last month, Tesla unveiled plans to develop and produce “tabless” battery cells, called 4680, that enable a 16% range increase for its vehicles. The new cells are bigger than Tesla’s current cells, measuring 46 millimeters by 80 millimeters, thus the 4680 name. Tesla also noted that the company can’t be alone in increasing battery production, hinting that it will continue to outsource to suppliers like LG Chem.

“It seems that LG Chem is in the process of making the 4680 batteries that Tesla mentioned last month,” said Hyundai Motor Securities analyst Kang Dong-jin.

LG Chem supplies batteries to major global electric car makers, including Tesla, GM and Volkswagen, as well as local automakers Hyundai Motor Co. and Kia Motors Corp.

Most EV makers currently use pouch cells. But Tesla has pioneered the use of cylindrical battery cells in its electric vehicles and several other companies have indicated that they will follow suit.

LG Chem, which posted record quarterly earnings on Wednesday, has forecast a further rise in its battery sales and profit in the fourth quarter.

Meanwhile, Tesla’s shares also climbed higher after the company reported its best-ever quarterly profit on Wednesday, saying it still hopes to hit its target of half a million car sales this year.

Tesla reported net income of $874 million excluding special items in the third quarter, up 156% from a year earlier, and nearly double its second-quarter profit. Revenue rose 39% on year to $8.8 billion.

Write to Jae-Kwang Ahn at ahnjk@hankyung.com
In-Soo Nam edited this article.