The increase in demand for Tesla cars has helped the world’s biggest EV battery maker reach the top of the list.
South Korean electric vehicle battery manufacturer LG Chem is one of the battery providers for Tesla. The recent rise in demand for Tesla cars has caused a surge in valuation for the battery maker. The company valuation is now estimated to be around $30 billion.
This means that LG Chem is now the sixth-largest stock on the Kospi index. The company has finally overtaken the largest automaker in South Korea, Hyundai Motor.
A huge boost in value
LG Chem supplies batteries for electric vehicles manufactured by several companies, not just Tesla. The company also supplies batteries for Hyundai.
However, what makes LG Chem so profitable is its deal with the Tesla factory in China. This particular factory is one of the biggest and most efficient factories in terms of production.
Tesla Q2 2020 Vehicle Production & Deliveries | Tesla, Inc. https://t.co/hgJDXLWmBg
— Tesla (@Tesla) July 2, 2020
The growing surge of demand for electric vehicles around the world means that automakers have to increase production. In turn, this has correlating effects in terms of demands for various components.
The battery is one of the most important components of an electric vehicle. Which is why battery manufacturers are dueling out for deals with huge automakers. This surge in demand is reflected in the market, with a huge valuation increase for battery manufacturers.
In a statement, Timefolio Asset Management chief executive Jae Lee said:
“We believe LG Chem is set to benefit the most in Europe with its high market share and positioning.”
LG Chem is miles ahead
In terms of demand, LG Chem is well ahead of the competition, according to several market analysts. The company controls 24% of the global EV battery industry by the end of May. Its rival, China’s Contemporary Amperex Technology, is experiencing quite a downturn because of the coronavirus pandemic. Moreover, Amperex is also stuck in the middle of a bitter trade war between China and the United States.
Early this year, LG Chem reported an order backlog of $124 billion. The company plans to expand its production capacity to 100 gigawatts/hour before the end of the year. Moreover, it also plans to reach 120 gigawatt/hour production by 2021.
Due to its newly found niche in battery production, investors are focusing on it rather than its traditional product. LG Chem is a chemical company, and chemical production accounted for 52% of its total revenue in 2019.
It appears that Tesla is such a huge hit that it has the power to boost its production partners. With growing demands in Europe, this will only continue to grow.
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