LG Energy Solution has decided not to use cathode materials from affiliate LG Chem in batteries supplied to Tesla due to unmet high energy density standards. Instead, the company is turning to competitor L&F to meet Tesla's demands for ultra-high nickel batteries. This shift highlights intensifying competition in the battery materials market amid a temporary electric vehicle demand slump.
LG Energy Solution, a major battery supplier, has excluded cathode materials from its affiliate LG Chem for batteries destined for Tesla vehicles and the Optimus humanoid robot. The decision stems from LG Chem's failure to meet Tesla's specifications for ultra-high nickel content, specifically 95% nickel, which offers over 20% higher energy density than existing 90% nickel products.
Tesla is accelerating the adoption of these advanced batteries across its lineup, starting with the new Model Y Long Range and Cybertruck, and extending to all models including premium ones like Model S and X. The company aims to improve driving range, output, and cost efficiency while reducing fire risks through advanced mass production techniques such as single crystal processing. Since the second half of last year, LG Energy Solution has been using cathode materials solely from L&F in its Tesla-supplied batteries, particularly for ultra-high nickel NCM ternary batteries.
A battery materials industry official stated, "Automakers urgently needing breakthroughs in performance and price are demanding technology at the limit level." Another official added, "Battery manufacturers also cannot afford the luxury of ‘taking care of affiliates.'"
This exclusion poses challenges for LG Chem, where Tesla-related volumes account for 30-40% of its total cathode materials shipments, estimated at 60,000-70,000 tons annually. Shipments could halve to below 30,000 tons this year, exacerbated by other automakers scaling back electric vehicle production. L&F, having invested preemptively in the technology, is expected to post an operating profit of around 120 billion won this year.
The shift underscores a ruthless survival competition in the battery sector, where even affiliate relationships yield to performance and price demands. Tesla's standards are influencing global automakers to adopt similar dual-track strategies, using ultra-high nickel for premium models and LFP for others, further intensifying the materials innovation race.