GM Strikes $18.8B Deal With LG Chem Securing Enough Materials to Produce 5 Million EVs

General Motors (GM) shares were 2% higher in intraday trading Wednesday after striking an $18.8 billion deal for LG Chem to supply the Big Three automaker with materials used to produce electric vehicle (EVs) batteries, in GM’s latest move to further its position in the EV market.

LG Chem is to supply GM with more than 500,000 tons of cathode materials such as nickel, cobalt, manganese, and aluminum, which the Korean chemical company said is enough to produce approximately 5 million EVs.

The $18.8 billion (25 trillion Korean won) contract is set to start in 2026 and run through 2035.

“This contract builds on GM’s commitment to create a strong, sustainable battery EV supply chain to support our fast-growing EV production needs,” GM Global Purchasing and Supply Chain Vice President Jeff Morrison said.

Morrison added that the deal would strengthen the North American supply chain for GM “at a critical time for the industry.”

LG Chem is to start producing cathode at its plant in Tennessee in 2026, which the company says will be America’s largest cathode plant. Construction for the Tennessee plant started at the end of 2023.

Traditional automakers like GM face an uphill battle in making the transition to EVs, with high inventories and profitability concerns. Tesla (TSLA) currently dominates the U.S. market for EVs, capturing more than 55% of the EV market in 2023, according to Kelley Blue Book.

However, GM has found some success in its EV transition, as the Chevrolet Bolt EV/EUV made up 5.2% of EVs sold in 2023. That made it the third best-selling EV model in the U.S. last year, behind Tesla’s Model Y and Model 3 which stood at 33.2% and 18.6%, respectively.

General Motors shares were up 2% at $38.81 per share as of about 1:40 p.m. ET Wednesday. The automaker’s stock price has climbed 7.6% so far this year.