Tesla is looking to acquire a stake in LG’s upcoming separated battery business, according to a surprising new report.
LG Chem has been rumored to be looking at separating its battery business from its other operations and making them a new publicly-listed entity.
Now The Korea Times, a news outlet based in South Korea like LG, reports that Tesla is interested in acquiring a stake in the upcoming battery company:
“Tesla is looking to acquire a stake in LG Energy Solution, soon to be separated by LG Chem, to procure a stable supply of batteries, bank sector sources told The Korea Times, Monday.”
However, the report is making it sound like the talks are very early.
“Tesla is looking to acquire a stake in LG Energy Solution. Specifically, Tesla is said to be exploring taking up to a 10 percent stake in LG Energy Solution,” one source said on condition of anonymity as he wasn’t authorized to officially speak to the media.
While another source suggested that it was too early to tell:
“It’s quite early to tell if Tesla has an actual plan to acquire a stake in LG Energy Solution. But given Tesla’s growing attempts at cost cuts and moves in producing round batteries, it does make sense that Tesla would explore an opportunity to buy a stake in LG Energy Solution,” another source familiar with the issue added.
Tesla has had a long-running battery cell supply with Panasonic, but it started expanding its battery cell supply chain a few years ago.
It first added LG Chem as a supplier for energy storage products and more recently, the company became a bigger partner to supply cells for Tesla’s Model 3 production in China.
Last week, Tesla officially announced its plan to have its own battery cell production, but it was also clear that it would keep buying more battery cells from suppliers for the foreseeable future.
This report is suprising for a few reasons.
First off, it’s unusual for Tesla to acquire a minority stake in a company.
In previous acquisitions, the automaker has sought to gain control over the companies and acquire the entire firms, which have later become subsidiaries of Tesla, like Maxwell, Hibar, and even bigger acquisitions like SolarCity.
The latter shows that Tesla is not opposed to bigger acquisitions, but even a 10% stake in LG’s battery business is likely to be more expensive than the SolarCity acquisition.
Tesla has quite a comfortable cash position at the moment and could also complete the transaction with shares, but it would be a surprisingly big move for the company.
Furthermore, LG is already tied up with several other automakers, including a partnership with GM. I am not sure if Tesla would be welcomed in that.
I would take this report with a grain of salt for the moment.
What do you think? Let us know in the comment section below.
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