LG Energy is strengthening its cheaper lithium iron phosphate (LFP) battery business with a new partnership. The South Korean battery maker said Thursday that it had signed a long-term** agreement with China's Changzhou Lithium Source New Energy Technology Co., Ltd. to step up production of LFP batteries for electric vehicles and energy storage systems.
At a time when global demand for electric vehicles is slowing, LG Energy is looking to diversify its product portfolio with cheaper LFP batteries.
Under a five-year contract for cathode materials**, the Nanjing-based company will supply LG Energy** with approximately 160,000 tonnes of cathode materials, which can produce batteries to power 1 million electric vehicles with a range of more than 400 kilometers (249 miles) per charge.
The value of the deal was not disclosed. The two companies will discuss additional ** agreements based on future market conditions.
Changzhou Liyuan New Energy Technology was established in 2021, with a battery material production capacity of 310,000 tons per year. The company has a 30,000-ton production plant in Indonesia and plans to expand the plant's capacity to 120,000 tons.
LG Energy last year began producing LFP batteries as energy storage systems at its Nanjing plant, which are much cheaper than nickel-cobalt-manganese batteries, which are more established in South Korea.
The battery maker plans to start producing LFP batteries for electric vehicles in the second half of 2025.
As Chinese battery manufacturers aggressively expand their market share, they aim to diversify their product portfolio and produce cheaper batteries.
While South Korean companies are primarily focused on NCM batteries, Chinese battery makers have been consolidating their leadership position in LFPs. About 90% of the world's LFP batteries are produced by Chinese companies, according to the Korea Institute for International Economic Policy, with Contemporary Amperex Technology and BYD currently battling for the top spot.