LG Energy Solution (LGES), one of the world's largest lithium-ion battery cell manufacturers, noted during a recent conference call that it is in talks with Tesla to supply batteries from an Arizona factory.

According to Reuters, the South Korean company said that it is in "active discussions" with Tesla, and "electric vehicle startups" to supply batteries from its proposed Arizona factory (announced in March 2022).

LG Energy Solution does not provide any details about the matter. What we know from the previous announcement is that the company intended to invest 1.7 trillion KRW ($1.39 billion at the time) to build in Queen Creek, Arizona a factory for cylindrical batteries for EVs and electric tools with an annual capacity of 11 gigawatt-hours (GWh). It would be a wholly-owned subsidiary rather than a joint venture.

The original timeline was to begin construction in Q2 2022 and start mass production in 2024, but a few months later - in July 2022, it was reported that LGES is reviewing the project, including "timing, size and details."

The most recent reports about "active discussions" indicate that negotiations with potential customers are not yet completed and some agreements must be reached before the project will get a green light.

As we understand, the company would like to secure sales before building a factory, which is not a surprise, especially considering the challenging economic conditions.

LG Energy Solution already is a Tesla battery supplier - an important one, as it supplies 2170-type cylindrical battery cells (NCM chemistry) for the Tesla Giga Shanghai (in parallel to CATL's prismatic LFP cells). As far as we know (it was mentioned by Tesla CEO Elon Musk), the LGES's Chinese battery plant is also supplying cells for the Tesla Giga Berlin plant.

Considering that Tesla is in high demand for 2170-type battery cells in North America, it might be interested in some additional supply also from LGES cells from Arizona (on top of all the other sources and in-house projects).

It's noteworthy that LGES plans to produce in South Korea also 4680-type cylindrical battery cells (a form factor selected by Tesla). We can't exclude then that the talks are related to 4680-type.

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