LG reportedly threaten to cut VW’s battery cell supply for EVs over gigafactory plans

VW has long been considering to build its own gigafactories to produce a high number of battery cells for its upcoming electric vehicles, but we now learn that LG reportedly killed the plans by threatening to cut VW’s current battery cell supply.

Back in 2016, VW launched a new commitment to electric vehicles as they slowly started to distance themselves from diesel following the Dieselgate scandal.

With a goal to make 3 million electric vehicles per year between all their brands (VW, Audi, Porsche, etc.) by 2025, they considered making their own battery cells in order to support the extremely high production rate, but they ended up abandoning those plans.

Instead, they issued battery supply contracts worth $48 billion with existing battery manufacturers.

But last year, VW CEO Herbert Diess said that he doesn’t want to become dependent on those manufacturers:

“We must not make ourselves dependent on a few Asian manufacturers in the long term,”

In October 2018, Manager Magazin reported that Volkswagen is in negotiations with SK Innovation, a Korean battery cell manufacturer, to partner up on a gigafactory in Europe.

The deal appeared to be similar to Tesla’s own Gigafactory 1 project with Panasonic.

Now, the German magazine reports that the negotiations have fallen apart because LG Chem, one of the battery suppliers that VW is going to be dependent for upcoming EV production, apparently threatened to stop supplying them as a result.

According to the new report, VW was planning to invest billions into 3 factories capable of producing gigawatt-hours worth of battery cells, hence the reference to “gigafactories”, but LG Chem, with whom VW is running a battery cell supply ‘task force’,  “threatened, under certain circumstances, to no longer deliver when VW starts production with SK Innovation.”

Volkswagen previously admitted that there’s a need for 40 Gigafactory-size battery factories by 2025.

There are currently about a dozen such factories in various stages of planning.

Electrek’s Take

If that’s true, it’s very disappointing of LG Chem.

VW would likely still be buying battery cells from you, they simply need a lot more than what LG can supply and therefore, they are planning to get them another way.

I can’t imagine them trying to slow down the deployment of much-needed battery cell production capacity.

Hopefully, it means that they plan to deploy the capacity themselves.

What do you think? Let us know in the comment section below.