General Motors and LG Chem have reached a $18.8 billion agreement for GM to supply the cathode materials needed to produce electric vehicle (EV) batteries.
After reaching a $18.8 billion agreement with LG Chem, one of the largest chemical companies headquartered in Seoul, South Korea, to supply the Big Three automakers with materials needed to create electric vehicle (EV) batteries, global American automaker General Motors (GM), whose headquarters are in Detroit, Michigan, is based in the US. On Wednesday, intraday trading showed a 2% surge in GM shares. This is GM’s latest attempt to strengthen its position in the EV industry.
More than 500,000 tonnes of cathode materials, including aluminium, manganese, cobalt, and nickel, will be supplied to GM by LG Chem. According to the Korean chemical business, this material can make about 5 million electric vehicles. This $18.8 billion contract (approximately 25 trillion Korean won) will begin in 2026 and will continue till 2035. It also stated that five million electric vehicles (EVs) with a range of more than 300 miles could be powered by that source.
Boosting North American Supply Chain
The cathode materials for GM’s joint venture battery cell operations in North America, including three joint venture plants with an LG offshoot named Ultium Cells, will come from an LG factory that is presently being built in Tennessee.
When the agreement was first announced in July 2022, neither the production location nor the pricing were specified. Although the most recent version extends the deal by another five years, the original was intended to expire after 2030.
LG Chem commented that they had plans to strengthen their partnership with GM, especially in the US market.
Jeff Morrison, GM’s Global Purchasing and Supply Chain Vice President, stated that GM is furthering its commitment to establish a robust and sustainable battery electric vehicle supply chain to meet the rapidly increasing demand for EV production. However, Morrison also said the agreement would help GM’s North American supply chain “at a critical time for the industry.”
In 2026, LG Chem plans to begin cathode production at its Tennessee facility, which it claims will be the biggest cathode plant in America. By late 2023, work on the Tennessee factory had begun.
GM Sees Bright Spot with Chevrolet Bolt EV/EUV
With enormous inventories and concerns about profitability, traditional manufacturers like General Motors are facing an uphill battle in their shift to electric vehicles. As per Kelley Blue Book, California-based vehicle valuation and automotive research firm Tesla (TSLA) holds a dominant market share of over 55% of the electric vehicle (EV) market in the United States.
Nonetheless, GM’s shift to EVs has been successful, as seen by the Chevrolet Bolt EV/EUV accounting for 5.2% of all EV sales in 2023. This placed it behind Tesla’s Model Y and Model 3, which had respective sales of 33.2% and 18.6%, making it the third-best-selling EV model in the United States for the previous year.