SOUTH KOREA’S LG Chem Ltd. plans to more than double production capacity of battery cells it makes in China for Tesla Inc. electric vehicles (EV) next year, sources said, to keep up with its U.S. client’s growth in the biggest car market.

The firm, a supplier for Tesla’s Shanghai-built Model 3, will also ship its increased output from China as well as South Korea to Tesla’s factories in Germany and the United States, said sources, signalling an increased role in the supply chain of the world’s leading EV manufacturer.

The plan comes as Tesla, LG Chem’s primary customer, scrambles to secure cells as part of an aggressive global production expansion plan, as it targets soaring demand fanned by governments promoting EVs to curb air pollution.

LG Chem has already added production lines in South Korea this year mainly to meet demand from Tesla’s U.S. plant, the sources said. Moreover, the automaker has asked Japan’s Panasonic Corp., which supplies the U.S. plant, to also supply its Shanghai factory, said one of the sources.

“Tesla simply doesn’t have enough battery cells,” said the person. “So LG Chem is going to more than double China output.”

Tesla’s growth represents a boon for LG Chem, Panasonic and Chinese supplier Contemporary Amperex Technology Co., with chief executive Elon Musk revealing plans in September to increase purchases.

Still, Musk said supplies were insufficient and announced Tesla’s plans to make its own, cheaper battery cells, a prospect that could injure suppliers’ pricing power.

(SD-Agencies)