LG Chem Hopes For 70% Increase In EV Battery Sales This Year, Will Make Money

1 year ago by Mark Kane 32

LG Chem lithium-ion battery cell

LG Chem lithium-ion battery cell

Vehicles with LG Chem batteries - November 2015

Vehicles with LG Chem batteries – November 2015

Nikkei reports that LG Chem expects EV lithium-ion battery sales to increase this year by 70%, reaching 1.2 trillion won ($1 billion).

It will be organic growth, fueled by the largest portfolio of carmakers in U.S., Europe and China that recently decided to use LG Chem cells for the next generation of plug-in cars.

“South Korea’s LG Chem expects its car battery business to reap 1.2 trillion won ($1 billion) in sales in 2016, a roughly 70% jump driven by expanded supplies to U.S., European and Chinese carmakers.”

We could only imagine that 2017 will be even better, as one of the larger projects – the Chevrolet Bolt (followed by Opel Ampera-e) with decent 60 kWh pack – will hit the maret in volume.

Also of interest is the news that this is the year LG Chem could reach the break-even point for the business. That’s even more important, because it will encourage more investment into R&D and the production capacity itself,  enabling even more affordable batteries in the future.

“Sales will likely surpass the break-even point this year, allowing the segment to post profit for a full fiscal year by 2017, the company said Monday.”

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32 responses to "LG Chem Hopes For 70% Increase In EV Battery Sales This Year, Will Make Money"

  1. Three Electrics says:

    One billion in sales equals 100,000 50 kWh cars at $200/kWh.

    1. jerryd says:

      3E, but they don’t sell to anyone that makes 200 mile range cars yet so try 16 and 24kwhr and redo the numbers.
      I’ve been saying for yrs now battery production is going up with a bullet both from EV’s but also home, building and grid batteries.
      And it’ll keep going up at 50-75%/yr for a decade, maybe 2, at least.
      50% of world homes will have batteries, and EV’s if they have a car, truck in just 20 yrs likely.

  2. SJC says:

    At $145 per kWh they have to make a LOT of cells to get to $1 billion per year.

    1. Pushmi-Pullyu says:

      LG Chem stated pretty firmly that GM was getting a price far below what it was charging other companies. In fact, it’s quite possible that’s a near- or at-cost price which LG gave GM as part of a package deal including LG Electronics building the entire powertrain for the Bolt.

      I don’t know what the average price would be for what LG is selling, but $200/kWh might be somewhere in the ballpark.

      1. jerryd says:

        PP, Not anymore!!
        It doesn’t take a genius to figure out how much lithium cells cost to make as both the materials and assembly are well known.
        The only thing unknown was the exact $, the range was known by anyone doing basic research.
        Though there were a bunch of paid to lie sources like Lux, Pike/Navigant that for yrs said lithium cost more than I was paying for EV quality cells like Tesla used retail in 1 EV quantities, 5k.
        And that was $250/kwhr 6 yrs ago retail.
        The materials to make a cell comes to about $60/kwhr now.

        1. ziv says:

          jerry, your numbers are pretty panglossian. Not even Tesla can get below $125 per kWh of cells. LG Chem will be able to supply cells to GM later this year for $145 per kWh but that is around $100 less per kWh than the deals they are giving to their other clients. GM got the $145 cell price because they were buying other LG Chem products that LG was selling more profitably.
          5 years ago cell prices were closer to $400-$500 per kWh for the better battery companies with their best customers.
          Being too optimistic is nearly as bad as being too pessimistic.

          1. Alex says:

            70% growth to 1 bln means about 600 mio. USD Sales in 2015. It is said that LG produced ca. 1,4 GWh in 2015. It makes 420 USD per KWh sold… Or is there any bug in this calculation ?

            1. Ziv says:

              “It makes 420USD per KWh sold.”
              What? That is wrong on so many levels.

        2. Pushmi-Pullyu says:

          jerryd said:

          “It doesn’t take a genius to figure out how much lithium cells cost to make as both the materials and assembly are well known.”

          The most brilliant genius can’t figure something out without sufficient data. Costs are a moving target, as battery makers are constantly fiddling with internal components and chemistry, always seeking lower costs and higher energy density. Nobody can possibly know everything that all the different battery makers are doing, or installing in their factories, because such details are kept as trade secrets.

          “The only thing unknown was the exact $, the range was known by anyone doing basic research.”

          It appears to be a rather strong mark of wishful thinking on your part that the $145/kWh represents an average. It’s almost certainly an extreme outlier. Tesla may be paying Panasonic somewhere in that ballpark for its battery cells, but I strongly doubt any other EV maker is paying much less than $200/kWh. And from what LG Chem said, probably many are paying significantly more than $200.

          “Though there were a bunch of paid to lie sources like Lux, Pike/Navigant that for yrs said lithium cost more than I was paying…”

          As they say: “Never attribute to malice that which is adequately explained by stupidity.” I don’t think Lux and Pike/Navigant are paid to lie; I think they are just running an (unfortunately legal) con job where they get people to pay them for “analyses” which are very poorly researched and completely worthless.

          “…for EV quality cells like Tesla used retail in 1 EV quantities, 5k.
          And that was $250/kwhr 6 yrs ago retail.”

          It never ceases to amaze me how often we see posts from people who think their own personal experience at buying some factory second or used batteries from an online source somehow gives them special insight into the “true” cost of batteries. Is it really that difficult to understand you’re buying them at a price below the manufacturing cost? It’s like buying bread from a day-old bakery outlet. It’s marked down to a very cheap price because if they can’t move it, they’re gonna have to just throw it away.

          Claiming that battery makers’ “true costs” are far less than they’re charging their customers is nothing short of a conspiracy theory.

          “The materials to make a cell comes to about $60/kwhr now.”

          That’s a pretty meaningless number. Since the cost of converting battery cells’ raw materials into processed materials is such a large proportion of cell costs, for all practical purposes it’s impossible to separate materials costs from processing costs.

          For example, lithium carbonate is sold by the ton, and is pretty cheap. But by the time it goes through all the processes needed to covert it into lithium ion electrolyte, the battery manufacturer has spent quite a bit of money on it.

          1. polytropos says:

            “Since the cost of converting battery cells’ raw materials into processed materials is such a large proportion of cell costs, for all practical purposes it’s impossible to separate materials costs from processing costs”
            based on what I have heard from several OEM podcasts, this is incorrect. Li-ion batteries are somewhat unique in that there is a very high BOM to COGS ratio. In other words the cost of raw materials (BOM) in not a lot less that the cost of finished goods (COGS). this is one of the many reasons Tesla maxed out the Gigafactory capacity – Li-ion batteries are being “commoditized” – there is not a lot of unique value add, so the best strategy is the oldest – increase volume to drive down price

  3. sault says:

    That works out to 6.9 million kWh of batteries or enough to supply 115k Bolts. Keep in mind that Chevy probably already has a lot of these batteries either under contract or already delivered to their assembly plant, so some of the $1B in LG battery revenues for this year includes Bolt battery pack deliveries.

    I don’t know how much other car models contribute to their business, but if anybody has any intel on this, it could be used to estimate Chevy’s initial production rate for the Bolt.

  4. Jychevyvolt says:

    Is LG the first to giga dollar?

    1. kdawg says:

      And a Tera-won

    2. JakeY says:

      I’m pretty sure Panasonic surpassed that already. Inside EVs’s Panasonic estimated revenue from Tesla alone was $880 million for 2015.
      http://insideevs.com/panasonics-sales-profits-comes-automotive-industrial-systems/

  5. ModernMarvelFan says:

    If LG Chem turns profit on the battery this year and demand sustains itself, I wouldn’t be surprised to see LG Chem drops some major investment on some new and bigger battery factories across the world.

    Let the battery war begin!

    1. jerryd says:

      Modern, They already have 3 but that is hardly enough for the demand coming when 20 car companies make 200 mile EV’s.

      1. ModernMarvelFan says:

        I am skeptical.

        Let us see the demand first.

        Remember that 2015 had a YOY sales drop in the US…

        I am sure if LG Chem sees the real demand, it will dump money into it. Afterall, that is why it is in the business in the first place.

        1. przemo_li says:

          And the USA is whole world…

          USA choose SUVs of which ZERO was electric.

          EU had those and it had 80% increase in sales.

          However 2016 will still be small improvement. Bolts and Ms will be delivered and accounted for in 2017, while SUVs will have slower start.

          But guess what? USA is not even biggest market now. It will fall to third position. After China / EU this year.

          Simply smaller model selection…

          1. ModernMarvelFan says:

            “It will fall to third position. After China / EU this year.”

            US auto market is still #2 in overall size which is the market potential. US auto market is still the most profitable market in the world.

            Yes, it lacks SUV choices, but its regulation also doesn’t favor the “lame and weak EU compliance” cars (aka sub 15 EV miles PHEVs) as EU does.

            And No, I don’t hope any hopes for the Mitsubishi Outlander PHEV..

        2. Pushmi-Pullyu says:

          ModernMarvelFan

          “Remember that 2015 had a YOY sales drop in the US…”

          A drop in plug-in EV sales? Yes, but let’s also remember that worldwide, sales increased significantly that same year. LG Chem’s market is worldwide, not just the USA.

          1. ModernMarvelFan says:

            Yes, that is a valid point.

            US is still a large market though.

            China has a huge number but it seems that BYD and smaller battery players dominate that market.

            The EU market is split between Panasonic/Tesla and Nissan with LG at 3rd which is similar to the US market split. As some of the European incentives go away sales will be impacted (Netherlands as an example).

            We will see. I certainly hope the YOY drop in the US is really a brief setback rather than a trend. I am just more cautious and hope I am wrong.

    2. Battery Bro says:

      They already are, some major 18650 factories are opening doors in China. As well, Europe just got an LG Chem EV battery factory in Poland. Poland is sort of the HQ of LG in Europe.

  6. Pushmi-Pullyu says:

    Based on last year’s production figures, a 70% growth would only move LG Chem from the #5 spot to the #4 spot, behind Panasonic (Tesla), AESC (Nissan), and BYD. Furthermore, I suspect BYD is also ramping up production rapidly.

    LG Chem talks big about their plans for growth, but they aren’t one of the top dogs.

    http://evobsession.com/ev-battery-manufacturer-sales-market-share-march-2015/

    1. Jychevyvolt says:

      Perception is reality. Right now, LG got the best dope.

      1. Pushmi-Pullyu says:

        Well put, sir. Yes, LG Chem is the media darling, but their claims have nearly as much hype as Tesla’s. (Oops, did I say that out loud? 😀 )

    2. ModernMarvelFan says:

      That is old news… Q1 2015?

      Didn’t we just cover a more recent story 2 days ago here on inside ev?

      http://insideevs.com/panasonic-byd-lg-chem-were-largest-ev-battery-suppliers-in-2015/

      Not to mention that even in your Q1 2015 chart, LG Chem showed way higher growth than the #3 and #4 player…

      So, why are you so negative on LG Chem?

      1. Pushmi-Pullyu says:

        Thanks, MMF!

        Yes, that chart shows more recent info, and I should have linked to that. I just bookmarked it for future use, so again thanks.

        Okay, I admit to being surprised that LG managed to surpass AESC (Nissan’s supplier). I knew that Leaf production was down quite a bit last year, but I didn’t realize it was that far down!

        So, recalibrating… LG Chem is currently in the #3 spot, and isn’t far behind BYD for #2. It will be interesting to see if LG or BYD grows faster. LG Chem has lots of customers clamoring for their batteries, but BYD has a market undergoing rapid growth due to the Chinese government mandate to buy EVs.

        Given LG’s rapid growth last year, when BYD was benefiting from that mandate, it’s entirely possible LG will overtake BYD for the #2 spot.

        * * * * *

        Why am I “so negative” about LG Chem’s hype? I’m a seeker after Truth, and I don’t like hype. From the way most online articles mentioning LG Chem are written, the average reader probably thinks they’re the world’s #1 producer of li-ion batteries. That’s rather far from the truth, altho I see it’s somewhat less far from reality than it was a year ago.

        MMF, you may have noticed that I also frequently complain about all of Tesla’s hype, despite being a Tesla fanboy.

        1. Jychevyvolt says:

          LG is best (degradation) because GM used it in smart way unlike Nissan.

        2. ModernMarvelFan says:

          “Why am I “so negative” about LG Chem’s hype? I’m a seeker after Truth, and I don’t like hype. From the way most online articles mentioning LG Chem are written, the average reader probably thinks they’re the world’s #1 producer of li-ion batteries. That’s rather far from the truth, altho I see it’s somewhat less far from reality than it was a year ago.”

          I don’t think anyone is talking about LG chem currently. They are all talking about “forcast” for the future. If EV wars truly heats up (as I hope), then LG Chem will have far more demand than it can handle due to the potential customer base.

          If we look at the inside EV article, we can see that all 3 top supplier, Panasonic, BYD and LG Chem also happens to have the biggest growth rate as well (YOY from 2014 to 2015). The only difference is that BYD would take #1 and Panasonic would take #2 base on growth rate alone. But Panasonic had a much bigger base. Nonetheless, all three had tremendous growth rate (>60%). So, it is nothing wrong to showcase LG Chem as one of the top battery suppliers.

          I fully believe that by 2016/2017, LG Chem will turn itself into a solid #2. If other automaker can get serious enough, LG chem might be even to give a run for the #1 spot by 2020…

          It isn’t hype if LG Chem is really the “Leader of the remainder” so to speak (we clearly know that Panasonic/Tesla has been leader for years). In my opinion, LG Chem is probably the ONLY one that got the market potential to catch up to Panasonic “if” the rest of automaker get serious enough. But we will have to see.

          I don’t read it as a hype but rather as an “unrealized potential” in the future. We all know that Panasonic is going to live/die by Tesla, but LG Chem is far more diversified which can get it an edge in an uncertain market.

          Of course, for the sake of EV world, I hope all of them to grow into battery giants…

          We need far more battery than what Panasonic/Tesla can ever produce if we want to hit the 30% market penatration mark by 2030.

          1. Pushmi-Pullyu says:

            MMF, thank you for your posts on this subject. You’ve certainly educated me on several points, and my view of the subject is now a lot closer to yours than it was before reading your posts.

            I wish this sort of honest and thoughtful exchange of ideas was typical of Internet debates, instead of being unfortunately all too rare.

            1. ModernMarvelFan says:

              Thanks.

              I am trying to do my part. I can’t change others, but the least I can do is what I write.

              I find the comments more useful when we focus on the subject rather than personal attacks. (although sometimes personal attacks might feel better for a brief moment).

              The point of the comment section is to “exchange” thoughts and ideas (IMO) which I find occasionally useful in learning something new.

    3. Jake Brake says:

      People forget LG has a very strong baseline capacity in consumer electronics batteries to get them started.

      The way they’ve been winning business, I wouldn’t be surprised if they had 50 active programs waiting to be released in the next few years. Audi 48V, FCA Pacifica PHEV, Chevy Bolt aren’t on that chart. Nor is their grid storage business which just secured 1GWh of business with AES.