The planned joint venture between LG Energy Solution and China’s Geely Automobile is in danger of collapsing.
There has been no updates since the pair announced that they will form a joint venture in June 2019. In the meantime, Geely has formed joint ventures with CATL and Farasis.
CATL recently proposed to Geely that it will make the electric car batteries for Volvo, which was suppose to fall to LG, people familiar with the matter told TheElec. Volvo brand is under Geely.
In May 2019. LG had signed a battery supply deal with Volvo, but more orders will likely be placed to CATL going forward, they said, though Volvo had said it would procure batteries from both companies at the time.
A LG Energy Solution spokesperson said COVID-19 had delayed the formation of the planned joint venture. They added that the joint venture was small and even if it was canceled the impact on its operation would be minimal.
LG and Geely were planning to invest 103.4 billion won each in the joint venture to make a 10GWh per year batter production line.
There has been no discussion on even the most basic requirements to set up the venture like executives and management structure, the people said.
Geely last month that it was setting up a joint venture with Farasis to build a 20GWh per year battery line by this year. It will be expanded to up to 120GWh, the firm said. This is twelve times the planned line with LG.
Farasis is the largest pouch battery producer in China. LG also makes batteries in pouch type. CATL makes can type batteries.
The Chinese government is supporting pouch batter companies. People familiar with the matter said this was aimed at lessening the influence of LG, which is the largest battery producer in China.
Farasis’ deal with Geely includes a term that will have it supply battery at below market price, the people said. In turn, Geely had agreed to preferentially use Farasis’ batteries over others, they said.