LG Energy Solution's battery manufacturing plant in Poland [LG ENERGY SOLUTION]

LG Energy Solution is bolstering its cheaper lithium iron phosphate (LFP) battery business with a new partnership. The Korean battery maker said Thursday that it has signed a long-term supply deal with China’s Changzhou Liyuan New Energy Technology, which bolster the production of LFP batteries for EVs and energy storage systems.

The latest announcement comes as LG Energy Solution seeks to diversify its product portfolio with cheaper LFP batteries amid a global slowdown of EV demand.

Under the five-year cathode material supply contract, the Nanjing-based company will supply LG Energy Solution with some 160,000 tons of cathode materials, which can produce batteries to power one million EVs with a driving range of more than 400 kilometers (249 miles) per single charge.

The value of the deal has not been disclosed.

The companies will discuss an additional supply deal depending on the market situation in the future.

Changzhou Liyuan New Energy Technology, founded in 2021, has a battery material production capacity of 310,000 tons per year. The company has a 30,000-ton production facility in Indonesia and plans to expand the plant’s capacity to 120,000 tons.

LG Energy Solution began producing LFP batteries — which are significantly cheaper than nickel-cobalt-manganese (NCM) batteries in which Korean makers hold firmer standing — for energy storage systems at its Nanjing plant last year.

The battery maker plans to begin the production of LFP batteries for EVs starting the latter half of 2025.

Its goal is to diversify its product portfolio into cheaper batteries, as Chinese battery makers are aggressively expanding their market share.

While Korean companies were mainly focusing on NCM batteries, Chinese battery makers have been solidifying their leadership in LFP. Around 90 percent of the world's LFP batteries were made by Chinese companies, with Contemporary Amperex Technology and BYD currently racing for the top two spots, according to Korea Institute for International Economic Policy.