Mar 3 at 10:34
By Min-Jeong Lee
South Korea's LG Chem Ltd. has long watched Tesla Motors Inc. closely for
two reasons -- for the possibility of supplying rechargeable batteries to the
popular electric-car maker and to gauge demand for electric cars.
But its hopes of being named as a key battery supplier for Tesla in
addition to Japan's Panasonic Corp. any time soon took a blow last week, when
the Palo Alto, Calif., company announced it would set up a $5 billion plant to
manufacture batteries.
LG's battery making unit's share price has fallen 2.5% since the news was
announced last Wednesday. It last closed at 252,500 won ($237).
LG Chem tried to soothe concerns over the development, with the company's
chief executive, Park Jin-soo, seeking to divert focus to the company's long-
term prospects as the world's largest supplier of rechargeable batteries used in
electric vehicles.
Mr. Park, speaking to a group of reporters late Friday, said that LG Chem
has clinched multiple supply deals from other electric car makers, noting that
the company expects to add another 10 new clients on top of its existing 10
customers. He didn't name any of the new clients.
LG Chem currently makes batteries for electric-car models made by
automakers such as General Motors, Renault, Ford Motor, Volvo, Hyundai Motor and
Kia Motors.
"I can't put an exact figure to what the revenue will be (for electric-car
batteries), but from 2015, we will begin to benefit from these (new) contracts,"
Mr. Park said.
LG Chem, which currently relies on its petrochemical business to derive
more than 70% of its revenue, has a long-term target of adjusting that
proportion to 60% over time by boosting output from other business areas such as
rechargeable batteries.
Rechargeable batteries, including those used in smartphones, make up
approximately 10% of the company's revenue. LG Chem makes batteries used in
smartphones like the G Flex, a curved-screen phone made by LG Electronics, and
Apple's iPhones.
Despite being a pioneer in the rechargeable car-battery business, LG Chem
has faced headwinds in boosting the utilization rate for its factories as the
electric car market struggles to go mainstream. LG Chem's Michigan factory,
which had a high profile, ground-breaking ceremony that was attended by U.S.
President Barack Obama in 2010, initiated production after months of delay.
LG Chem is also reviewing the possibility of building a new plant for
electric-car batteries in China, Mr. Park added, half-joking that the heavy smog
in China could help speed up the adoption of electric vehicles in the highly
populated country.
More at The Wall Street Journal's Corporate Intelligence blog, http://
blogs.wsj.com/corporate-intelligence/
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