LG New Energy Nanjing Battery Plant Capacity Expansion

The European electric vehicle market continues to rise, and LG's new energy power lithium battery expansion is accelerating. On May 18, the completion ceremony of the second lithium-ion battery plant of LG Chem (Nanjing) New Energy Technology Co., Ltd. was held in Jiangning Binjiang Development Zone, Nanjing. It is reported that the plant mainly supplies power lithium batteries to the European market, with a total project investment of 1.3 billion US dollars (approximately RMB 8.4 billion). LG New Energy's lithium-ion battery project settled in Jiangning Binjiang Development Zone in July 2018. It is one of LG Chem's most important power lithium battery manufacturing bases. The total investment of the project is about 3.3 billion U.S. dollars (approximately 21.2 billion yuan). Among them, the first plant has achieved mass production in November 2019, and has continuously added new production lines, with an output of 27GWh/year. According to LG's new energy plan, by the end of 2021, it will increase its annual battery output from 120GWh in 2020 to 156GWh, an increase of 30%. It is worth noting that the second plant of LG New Energy Nanjing is mainly for the European market, which means that the batteries of this plant are mainly exported to alleviate the pressure of insufficient output of its European battery plants. At present, LG New Energy's international customers include Hyundai, Audi, Jaguar Land Rover, Porsche, Volvo, General Motors, Chrysler, Renault, Volkswagen, Tesla and other OEMs. GGII statistics show that in 2020, LG New Energy's global power lithium battery installed capacity exceeds Panasonic and ranks second, second only to the Ningde era. It is mainly driven by the sharp increase in European electric vehicle sales. In the first quarter of 2021, LG's new energy power lithium battery sales continued to increase, with sales and operating profit reaching 3.82 billion U.S. dollars and 310 million U.S. dollars respectively in the first quarter. It is worth noting that although LG New Energy's power lithium battery business continues to rise, it also faces tremendous pressure and risks behind the rapid rise. On the one hand, due to the large-scale recall of electric vehicles owned by Hyundai Motor and General Motors, as well as multiple ESS fire accidents in South Korea, the United States and other places, it has been exposed that LG New Energy’s lithium-ion battery products have large quality defects and potential safety hazards. It will greatly hinder the development of its power lithium battery business and energy storage business, which in turn will affect the company's profitability of LG New Energy. For example, in the Hyundai Motor Recall incident, LG New Energy and Hyundai Motor shared the cost of the Kona electric vehicle recall. LG New Energy bears 70% of the 1.4 trillion won (about 8 billion yuan) of the total recall cost, which is about 5.6 billion yuan. Greatly compress the profit margin of its power lithium battery business. On the other hand, with CATL, Samsung SDI and SKI accelerating the construction of European battery plants and the successive commissioning of local power lithium battery companies in Europe, competition in the European power lithium battery market is heating up rapidly, which has also put greater pressure on LG New Energy's performance increase.