LG Chem has signed a massive lithium-ion battery supply agreement with Renault. Indeed, this deal is so big that LG Chem company spokesman Song Choong-sup stated, "Considering the expected production volume of Renault's electric vehicles, the latest deal will be the largest that LG Chem has inked with automakers so far." Song declined to offer up financial details regarding its latest li-ion tie up, but industry sources estimate that the contract with Renault will exceed $1.8 billion over the next five years. The monumental size of this deal has even driven LG Chem to triple its future battery sales target from a projected 1 trillion won ($885 million U.S. at the current exchange rate) to 3 trillion won ($2.65 billion) by 2015.
Here's how the deal between LG Chem and Renault is drawn out. Under a multi-year contract, LG Chem will produce li-ion batteries and ship them out to Renault's numerous production facilities in Europe. The Renault-Nissan alliance plans to produce up to 500,000 EVs annually when demand, well, demands it, so LG Chem better start cracking to guarantee that li-ion supply can keep pace with the Alliance's bullish production plans.
In response to rising demand, the battery maker is reviewing plans to construct additional manufacturing facilities in Europe. But wait, that's not all. LG Chem spokesman, Song, revealed that the company has a few more deals in the works with leading automakers and adds that two or three more tie ups will be announced by year's end, which will further cement LG Chem's position as one of the world's leading li-ion battery producers.
What's interesting here is that the Nissan side has built its own batteries for the Leaf electric vehicle, and Renault getting a big batch from outside kind of raises questions about whether a.) Nissan's production capacity is not big enough to supply its corporate partner or b.) Renault doesn't want Nissan's batteries. Thoughts?