Tesla looks to LG, Samsung and SK to diversify its battery cell supply for the Model 3

Tesla often said that the Model 3’s $35,000 price tag was dependent on the company achieving its battery cost reduction goals at the Gigafactory. Recently, Tesla officials said that the Gigafactory should no longer be seen as a constraint in the Model 3 supply chain and that the company is confident in its capacity to start producing battery cells.

The factory was first presented as having a full annual output capacity of 35 GWh of battery cells and 50 GWh of battery packs – with the difference in cells being imported from other manufacturers, like Tesla’s Gigafactory partner Panasonic, but also other possible cells suppliers.

Now it looks like Tesla is looking to South Korea to diversify its battery cell supply chain for the Model 3.

A new report from the Korea Times cites claims that “Tesla executives recently visited key research centers at LG Chem, Samsung SDI and SK Innovation, holding working-level meetings with all of them.”

These three battery manufacturers represent a significant portion of the entire world production of li-ion battery cells and all three refused to comment on possible talks with Tesla.

The report ties these alleged meetings with the Model 3’s battery supply chain and cites a company official:

“This is why LG Chem, Samsung SDI and SK Innovation all are keenly interested in boosting their tie-up with Tesla. The three Korean battery manufacturers can’t afford to lose the new business given the Model 3’s impressive initial responses from customers,”

Tesla already has a battery supply agreement with LG Chem for the battery cells used in the battery pack upgrade of the Roadster 3.0. Independently, LG Display, another LG-owned company, has also been reportedly selected to be “a sole supplier for the 15-plus inch center display of Model 3.”

While Tesla has only been using a custom 18650 cell from Panasonic, it has been looking into diversifying its supply chain for a while now. Since last year, the company notes its ability to source battery cells from multiple vendors in its SEC filings:

We believe our ability to change battery cell chemistries and vendors while retaining our existing investments in software, electronics, manufacturing equipment, testing and vehicle packaging, will enable us to quickly deploy various battery cells into our products and leverage the latest advancements in battery cell technology.

In the same filing, the company said that it had already selected several sources for the battery cells, but qualified only one cell (18650 from Panasonic) for its battery pack and Tesla expects qualifying additional cells from other manufacturers “in 2015”.