LG Chem announced on Feb. 7 that it had secured a 25 trillion won contract with General Motors (GM) for the supply of cathode materials. The deal, the largest of its kind for LG Chem, will provide batteries for up to five million electric vehicles (EVs). The agreement was reached during talks between GM CEO Mary Barra and LG Chem Vice Chairman Shin Hak-cheol, held during Barra’s first visit to Korea. Both companies view the recent slowdown in EV demand as temporary and have entered into the contract in anticipation of a future increase in sales, ensuring a steady battery supply, according to sources familiar with the matter.
Per the agreement, LG Chem will supply GM with a minimum of 24.75 trillion won worth of cathode materials until 2035, with the volume expected to exceed 500,000 tons. This contract solidifies a comprehensive agreement reached between the two companies in July 2022 for the long-term cathode material supply. LG Chem plans to begin supplying GM in 2026, when its cathode material plant in Tennessee, United States, currently under construction, becomes fully operational. The cathode materials produced at the Tennessee plant are expected to be primarily used in batteries manufactured by LG Energy Solution and GM’s joint venture corporation.
Players in the automotive sector find the timing of this contract meaningful. While GM initially aimed to produce 400,000 EVs in North America by 2024, it recently revised this target downward. Nevertheless, GM maintains its commitment to EV adoption, pushing forward with plans to transition all vehicles to electric by 2035. A source in the domestic industry noted, “GM, with its goal of becoming a leader in the EV market, has proactively secured volume in preparation for the recovery in EV demand.”
During her visit to Korea, Barra is said to have made a separate request to LG Energy Solution, a battery supplier, to lower the unit price of certain products, unrelated to the aforementioned contract. Sources reported that recent competition in the EV market has intensified price reduction efforts, according to her explanation, making adjustments to the unit prices of essential components such as batteries unavoidable. Barra also reportedly asked LG Energy Solution to upgrade GM’s portion of the tax benefits they receive from the U.S. government, known as the Advanced Manufacturing Production Credit (AMPC), by more than 50%.
