Volkswagen’s Gigafactory Plans Threatened By LG Chem Objections?

FEB 22 2019 BY MARK KANE 57

LG Chem puts pressure on VW?

According to the latest news from Germany, Volkswagen encountered a conflict with its lithium-ion battery supplier LG Chem, which threatens its plans to build its own battery gigafactories in Germany.

Volkswagen entered into a partnership with SK Innovation to build a battery plant in the U.S. and it was expected that the two could build a joint gigafactory-type of plant in Germany, but reportedly LG Chem has taken issue with the idea.

There is a risk that LG Chem could stop supplying Volkswagen Group with battery cells if the VW-SK Innovation starts production. Because LG Chem is currently the biggest battery supplier for Volkswagen, it would be devastating to the entire EV strategy.

“LG Chem threatened, under certain circumstances, no longer deliver when VW with SK Innovation into production”

As the reports remain unofficial, time will tell how and if Volkswagen will be able to diversify its supplier base.

Source: manager-magazin.de via Electrek

Categories: Battery Tech, Volkswagen

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57 Comments on "Volkswagen’s Gigafactory Plans Threatened By LG Chem Objections?"

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It says a lot about the power dynamics of the EV revolution that the battery maker is able to strong-arm the car maker.

Yeah. I wrote that this would happen about 4 years ago.
Wait until China owns the legacy car makers and then decides to go after nations.

I Don’t know about China, but I think VW (or maybe a group of Euro car makers jointly) should just go it alone or create Tesla/Panasonic like JVs even if this means some delays. Not good to have your most critical supplier dictating terms to you.

agreed. That is why I was bringing it up sometime ago.
These companies are heading for a major cluster.

Delay of 5 years = rapid death in the EV market. But I guess they could put making cars in that case and sell batteries, like LG. Times are changing. Car sales, including EVs are set to contract due to VOD, or vehicle on demand. Battery sales, by contrast, will skyrocket.

5 years from now the major automakers will still be making a lot of money selling ICEV’s as they’ll still be the majority of cars sold at that point. VW could use that time and ICE profits to further EV development while building their own battery factory

It is their own dam fault waiting so long in VWs case and LG raising prices in their case. Making cells is not rocket science with lots of known chemistries available to lease they’ll have to make at least some of there own as obviously LG, Panasonic are not going to supply the needed amounts as both have had to be dragged kicking and screaming to higher production. KoKams flexible sheet cell patents should be coming up soon or the company that bought what is left could really ramp up. I wonder why Dow never pushed them as they were excellent 100amphr cells that powered SCCA race car over 10 yrs ago winning some races in the high modified class, Imp by ProEV. Personal I like flat cells as so much easier to cool and make into packs and I’d have to think they would be far easier to produce. The A123 patents should be up and if heavier, they are powerful, long life. It’s been obvious for 20+ yrs now battery production will be the restraint on EV production as has to start from scratch. And today’s world production barely makes a scratch in the future demand to replace… Read more »

Since the USA are „coming after us“ for „national security“ reasons anyway….

In once sense this is stupid as the battery market is STARVED for Supply.

I know that this is a spectacular comment to make but World War II in the Pacific was started specifically because of energy.

I am not claiming this is the same thing, however there are parallels. It will be interesting to see how this is resolved

no, that is a myth.
Japan hit us to take us out so that they could invade other nations in Asia, and allow their alley Germany to own Europe and Russia.

Japan had already invaded the nation it wanted, China, as a supposed solution to the US-triggered global trade war during the Great Depression. The problem was that it still needed goods from the other empires, which were hitting it with economic sanctions to punish it for that invasion. Instead of backing down, the Army-dominated leadership doubled down and added Indochina (rubber) and Indonesia (oil) to its list. Every further act of conquest led to more sanctions, which then required more conquests to offset, until the military decided it was willing to go all the way to a war with the US and Britain.

Lol – yeah sure. Japan was defending all the oil and gas wells in Vietnam and Thailand. It was peak oil! We are about to run out of natural resources! Soon we will run out of silicon and carbon and iron! Damn those capitalists who devour all raw materials. Soon we will run out of sunlight as every square meter of the earth is covered with solar panels by the capitalists. Wake up and join the Democratic Socialists and AOC to stop the raping of mother nature – the god of our new religion.

I believe I mentioned that it is not a good idea for everyone to put all their eggs in the LG Chem basket in the article about Nissan’s move to them. The reason is exactly this type of situation.

They have to fulfill the current contract no matter what ( or pay the price). No big deal.

Elon Musk’s decision to assure battery supply by way of Tesla’s own gigafactory is looking better and better.

Converting to EV production really takes a full commitment. That includes setting up battery supply that’s not at the mercy of an outside company, and does not depend on a supply that has to compete with other companies’ battery demands. Otherwise you end up like Hyundai, with nice vehicles that can only be produced in compliance quantities.

Well, elon is STILL at the mercy of Panasonic. The difference is that Panasonic is also at Tesla’s mercy.
Basically, the M3 cells chemistry belongs to Tesla, however, all the manufacturing equipment, is Panasonics.

LG OWNS the other companies. LG manufactures for a number of those companies, which makes them fools. ALL OF THEM.

Tesla and Panasonic are in a mutually beneficial partnership or Joint venture. I would think that they have clearly defined obligations to each other and each have a positive incentive to have the other satisfied. This was a great Idea on Elon’s (or other’s?) part.

Elon Musk is Nobody’s Fool.. 🙂

…and now Tesla is the sole owner of its own battery manufacturing company, Maxwell.

Maxwell does NOT make batteries. They make ultra-caps, though they obviously have R&D into battery tech (which was interesting).
Hopefully, Tesla uses these for their massive SC 2.0 along with the truck UC.

Not quite, and that is my point.

Elon did not want a FULL partnership like this. Tesla was going to bring the full battery production IN-HOUSE.
BUT, Panasonic did not want to get Elon get to a certain point and be dropped as partner.
So, Panasonic is doing the manufacturing with their own machines, but in GF1, they are using Tesla’s chemistry.
Likewise, in GF2, Panasonic agreed to take over manufacturing of solar panels using Tesla’s IP (which was better than Panasonics). This was because Tesla was running short on resources. Sadly, the one place they SHOULD be going, would be using automation to build solar over parking lots. Right now, Tesla is in deep trouble with NY.

In the end, It is a case of MAD for these 2, at this time. We do not know if Tesla can actually leave that agreement after a length of time.

And Panasonic has been a less than enthusiastic partner slowing down advancement at every chance.

do you have proof of that?
If so, then it re-enforces what I say.

I’m sure the Germans would be working hard to start developing their own battery IP they can then licence to the battery makers. Or, do what Tesla is doing and collaborate with the battery maker to improve the cells which they can then use on an exclusive arrangement. This is what the SK/VW partnership will be about.
LG is probably pissed that they will be locked out of the main action. And VW’s decision essentially says that LG battery technology isn’t good enough.

Grabbing popcorn…

I agree a bit, but it is also bad news for us. If VW can’t make the cars there is a competitor less and so prices etc…

LG Chem or Samsung SDI are not going to just watch SK Innovation swoop in and partner with VW. They need to block it or else their share of the battery pie shrinks. We can also assume that SK Innovation and SK Hynix pool their technology. And that is a big threat to LG Group, which does not own a high-margin memory chip division like Samsung Group and SK Group. VAG could easily negotiate with LG to build factories as well. This appears that VW has more leverage here because they already contract other battery cell suppliers, Samsung SDI, SK Innovation, CATL, and so. To me, LG Chem made a big mistake.

>Source: manager-magazin.de
oh wait… it is not reliable report. Anyway, if this is true, big automakers should think twice before partnering with LG.

And yet, right now there is a supply issue, and LG isn’t keeping up with demand.

At the mercy of the drug company.

That would be the stupid for LG Chem or any “Korean” company make threats to a western company.
Does LG Chem really want to be a part of any Donald Trumps tweets.?

Drumpf thinks that German cars, MANY of which are made here in USA, are a national security threat. He would probably like LG tweaking them. He and his pal Kim (aka little rocket man) can get a chuckle out of it while getting rid of DPRK nukes….NOT.

Trump treats South Korea as more of an enemy than North Korea.
Maybe the fact the people of South Korea forced its president to resign because of a single corrupt crony rubs Donald the wrong way.

Yes, he prefers the immune dictatorship model

Last year VW committed € 40 billion to battery purchase and manufacturing and split it across 3 companies SK Innovation, CATL and LG-Chem. They would have been crazy to put all that money into one partner. Now LG-Chem is not happy with their giga-deal and wants to threaten a production block. This shows one of the reasons why you do not want to rely on just one supplier.

Not so sure whether this explains the entire story. VW is not exactly known for being generous to their suppliers. On the contrary. VW had a number of issues with some suppliers over the last years and some factories came to a halt as a consequence. Could it be that VW just overplayed its hand?

The EV battery sand box is starting to look a little bit like that other OPEC sand box.

“Can’t we all just get along?”

After they finish Khashoggiing good old Goshen in Japan,
Maybe Maduro is going under the bus next, in a Gaddafi type EVent?

Nice conspiracy theory, comrade. Workers (i.e. the useless graduates in gender studies carrying education loans) unite! Demand more jobs (that produce nothing) from government!

“Volkswagen plans to build its own battery gigafactories in Germany.”

That’s a good plan.

Volkswagen can choose any battery cell producer as their partner.

If LG Chem think that they can do better than SK Innovation than they should make a substantially better offer to Volkswagen.

Volkswagen is in a good position.

This is likely just a negotiating tactic by LG to secure a larger share of VW’s business. Nothing to see here, move along.

The main impetus for Tesla’s gigafactory was to insure supply and not to be beholden to the battery powers that be. LG Chem has VW over a barrel, and I bet it really irks them to no end, as well it should. But I guess when European auto makers finally get their acts together, well, then it’s all over for Tesla, as they just won’t be able to compete. Yada, yada, yada…

The perfect scapegoat for VW to now say “we have pushed back our timelines because of the LG Chem objections” — now will be 2024 without bringing blame to themselves….. uggg.

Who started this whole mess? It is obvious LG Chem’s fault.

Ya we’re supposed to believe VW made LG Chem say this as part of a conspiracy? One that would involve LG making less batteries= less money?

Yeah, let’s believe VW — after all their diesel engines were telling us the truth.

The VW-group is now planning to produce 15 million EV’s until 2025 instead the previously planned 10 million, so the additional supply has to come from somewhere and LG-Chem is threatening now to get most of the additional 5 million cars battery supply.

Also the E-Niro is already sold out for more than a year in Europe and no increase of production is possible because of battery cell supply constrains. As LG-Chem can’t deliver – Kia is already sourcing from SK for the Niro and Nissan Leaf plus (62KWh) is also using their own battery instead the originally rumored LG-Chem cells.

There is a heavy discussion in Germany to get the own battery cell supply established to avoid being hostage of an oligopoly of Asian battery companies, so this news making headlines all around Germany will give a boost to the local cell production plans pushed for by the government.

It doesn’t seem any company has the ability to expand battery production rapidly enough to punish laggards.

In a battery constrained world, the big battery makers hold all the aces.
I fully expect Tesla after the acquisition of Maxwell will begin making its own batteries at some point. There is no way Elon would be comfortable relying so much on Panasonic.

VW should keep a diversity of suppliers of batteries.

LG bought the VW business to secure their future long term. Theyve been developing batteries for the past 25 years. If VW is planning to screw LG long term then LG has every right to just stop now.

How is developing their own factory out in the open “screwing them”?

Depending on their contract.

This is LG protecting Hyundai/Kia. The owners of both companies are pals and likely worked this deal out on the back nine… Just watch what happens when LG attempts to purchase their next 5-axis machine tool CNC machine from Germany.

VW has made a lot of noise about their huge EV strategy. But they haven’t figured out their battery sourcing?

They have.
But they are used to getting all they want from their suppliers.

IF true, VW needs to stand up.
Supposing there was a reasonable tender process for the gigafactory partnership. (Wich I am not sure there was.)

If VW can fool government regulators and inspectors on three continents regarding diesel emissions, how can one believe VW’s version of this dispute?