Dive Brief:
- Rivian has signed a five-year battery supply agreement with LG Energy Solution Arizona, according to an announcement Friday.
- Rivian expects the deal will help trim sourcing and production costs, further reduce battery weight, enhance energy storage and improve battery pack assembly processing by 45%, according to a shareholder letter.
- The next-generation cylindrical battery produced by the LG Energy Solution subsidiary will be used in Rivian’s R2 model, set to hit the North American market in early 2026.
Dive Insight:
CEO R.J. Scaringe told analysts on Thursday Rivian has been working on its relationship with LG Energy Solution for “quite some time,” and now the battery supply deal will help pay off through reduced costs and parts for the company.
“We’re using a cylindrical cell, a 4695 cell. So 46 millimeters in diameter, 95 millimeters tall,” Scaringe said, noting the cell is then used in a “uniquely-designed pack” that will be a “core structural element of the vehicles.” He noted not only will the battery pack be a part of the body, but the top of the pack actually forms the floor of the vehicle.
Scaringe also laid out how integrating the battery pack into the R2’s design as a structural element helped the company eliminate costs, as part of its efforts to keep the new vehicle at a starting price point of $45,000.
The U.S.-based battery production will also help Rivian meet Inflation Reduction Act standards, to help the R2 qualify for EV tax credits, according to the automaker's shareholder letter.
“These are the types of decisions we're making across the R2 program to drive cost efficiency,” Scaringe said.
The deal with Rivian also brings some benefits to LG Energy Solution, according to the battery maker.
The battery manufacturer said its agreement with Rivian strengthens its U.S. presence where it is now building a plant in Arizona to produce the batteries. LG Energy Solution expects production at its Arizona site to begin in late 2025. Finished batteries will be delivered to Rivan’s plant in Normal, Illinois, where it’s manufacturing the R2.
“This large-scale order from Rivian for 4695 batteries marks a key milestone for LG Energy Solution in expanding its client base within the cylindrical battery segment,” LG Energy Solution CEO David Kim, said in a statement.
While the automotive industry is still facing a slowdown in demand for EVs, it hasn’t curtailed automakers from transitioning production. In turn, automotive suppliers like LG Energy Solution are also adjusting their technology and manufacturing investments to support the transition.
The battery manufacturer also inked a long-term battery supply deal with Ford Motor Co. last month, for the automaker's Europe market needs. The duration of the contact could range between four and six years.
“Due to the dynamic nature of the current EV market, an increasing number of global automakers are demonstrating a strong preference for a diverse range of battery form factors,” Kim of LG Energy Solution said.
Edwin Lopez contributed to this story.
