LG Energy Solution (LGES) has reportedly secured a major contract to supply Mercedes-Benz with next-generation 4680 cylindrical batteries for electric vehicles (EVs), starting in 2028.
This marks LGES's first large-scale 4680 battery agreement with a global automaker, representing a milestone in high-performance battery technology. The partnership solidifies LGES's leadership in the global EV battery market. According to reports from electrive.com, this agreement will be pivotal in advancing the future of EV battery technology.
According to Korea Economic Daily, ZDNet Korea, and Just Auto, LGES plans to supply Mercedes-Benz with 50.5 GWh of 4680 battery capacity using 4680 cylindrical cells from January 2028 to December 2038. This supply is expected to power approximately 630,000 EVs, highlighting the growing demand for high-energy-density batteries as the global transition to electric vehicles accelerates.
While LGES has not disclosed specific financial details due to confidentiality agreements, analysts estimate the deal could be worth several trillion Korean Won, approximately several billion US dollars. This underscores the potentially significant impact on LGES's financial performance in the coming years.
In April 2024, LGES began building a dedicated factory in Arizona, US, specifically designed to produce 4680 batteries. The facility, expected to be completed by 2027, will serve as the main production base for supplying Mercedes-Benz. This factory is a crucial step in LGES's North American expansion, meeting the growing demand for high-efficiency EV batteries from automakers like Mercedes-Benz.
The 4680 battery is seen by LGES as a game-changing technology. According to reports, LGES executives believe the partnership with Mercedes-Benz gives them a competitive edge over Chinese battery manufacturers. This collaboration is expected to strengthen LGES's global presence in the EV battery market, particularly as competition from Chinese suppliers intensifies.
Chinese battery manufacturers, led by CATL, are strong competitors in the global and European EV battery markets. In 2024, CATL held a 34.5% share of the European EV battery market, while LGES had 31.2%, showcasing intense competition between the two giants, according to reports from MarketScreener and EV inFocus.
Other major Chinese battery makers include BYD and several companies specializing in lithium iron phosphate (LFP) technology, such as Hunan Yuneng New Energy, Shenzhen Dynanonic, and Hubei Wanrun New Energy Technology. These firms dominate the production of LFP cathodes, a critical component in affordable EV batteries that are increasingly in demand, particularly in Europe.
While AA batteries are commonly used in electronics, they are different from the 2170 cylindrical batteries found in electric vehicles (EVs). A typical EV uses around 3,000 to 4,000 of these 2170 cells, which adds significant weight and reduces energy efficiency. Managing such a large number of cells also presents challenges in battery control and thermal management.
In contrast, an electric vehicle only requires 600 to 1,300 4680 batteries, which significantly reduces the number of cells needed. This lowers vehicle weight, enhances energy efficiency, and improves battery management. As a result, 4680 batteries have vast growth potential in the future EV market.
Additionally, LGES plans to supply a limited amount of 4680 batteries from its Ochang plant in Cheongju, Chungcheongbuk-do, South Korea, to Tesla, with shipments beginning by the end of 2024, according to Battery Tech. This collaboration showcases the growing appeal of 4680 batteries among automakers and underscores their technological superiority.
In the Mercedes-Benz EQC electric vehicle model, LGES batteries are already in use, while other models have selected batteries from CATL, SK On, and Farasis Energy. This new partnership between LGES and Mercedes-Benz strengthens their collaboration in the EV sector and reflects Mercedes' confidence in LGES's high-energy-density battery technology.
In March 2024, executives from LG Group subsidiaries visited the Mercedes-Benz headquarters in Germany for LG Tech Day 2024, showcasing several cutting-edge automotive electronics technologies. This event deepened the technical collaboration between LGES and Mercedes-Benz, laying the foundation for their large-scale 4680 battery supply agreement. The partnership emphasizes the increasing reliance on LGES's advanced battery technology as a cornerstone in the EV sector.
