Tesla (NASDAQ:TSLA) is seeking to buy a stake in LG Chem‘s (OTC: LGCLF) battery business, according to a new report, a first for the upstart electric automaker.
The Korea Times reports that Tesla is “exploring” the possibility of taking a stake of up to 10% in LG Energy Solutions, the tentative name of the company that will be created by the upcoming spinoff of LG Chem’s battery division. LG Chem expects to complete the spinoff in December.
LG Chem is a major supplier of electric-vehicle batteries to several automakers, most notably Tesla and General Motors (NYSE:GM). LG Chem supplies batteries and related systems for GM’s electric Chevrolet Bolt, and the two companies are engaged in a joint venture to build a new battery factory in Lordstown, Ohio.
The Lordstown factory will manufacture GM’s proprietary Ultium batteries, which are expected to power a wide range of new vehicles over the next several years.
It’s not clear whether GM will also seek a stake in LG Energy Solutions.
For Tesla, an investment in LG Energy Solutions could help it secure a steady supply of batteries as it seeks to increase production and sales over the next several years. The company opened a new factory in Shanghai late last year, and has vehicle-assembly plants under construction in Texas and Germany.
Tesla and LG rival Panasonic (OTC:PCRFY) have together operated the Gigafactory, a large-scale battery factory in Nevada, for the last several years. Until recently, the Gigafactory was able to supply enough batteries to meet Tesla’s production needs.
But Tesla, which also recently began buying batteries from China’s Contemporary Amperex Technology, is now seeking to diversify its battery supply chain in response to concerns about potential shortages as the battery industry scrambles to keep up with growing demand for electric vehicles.