Mercedes has inked a significant new supply deal with South Korea’s LG Energy Solutions. On paper, the agreement appears to be a routine procurement for the carmaker’s next wave of electric models. But in practice, it exposes the deepening malaise within Europe’s battery ambitions, as one of the continent’s flagship manufacturing projects continues to miss its mark.
The latest agreement, worth around 1.1 billion euros, will provide batteries for Mercedes’ North American and European operations from 2028. It is the third major contract the German group has signed with LG in less than two years.
A deal on LFP chemistry?
While previous deals focused on high-performance cylindrical cells, analysts believe this chapter is aimed at mainstream and entry-level models, slated for the more affordable LFP chemistry.
It dovetails with the recent launch of the brand’s Mercedes Modular Architecture, which debuted on the new CLA, which is enjoying early success in sales. Together, the recent commitments amount to nearly 160 GWh of capacity.
The timing of Mercedes’ renewed embrace of LG comes in the shadow of Northvolt’s collapse into bankruptcy half a year ago. This blow further eroded investor confidence in Europe’s ability to build a competitive battery sector.
Although U.S.-based Lyten saved Northvolt, the deal underscores that the company faces a steep uphill climb to regain confidence.
Instead, Mercedes’ chief executive, Ola Källenius, flew in the opposite direction. He travelled to Seoul earlier this year for talks with LG leadership. This was already an unmistakable signal that the company favours supply chain reliability over Europe’s still-uncertain push for vertical integration.
From the first row
Mercedes is seeing industrial battery flaws firsthand through its joint venture with Stellantis and Total Energies Saft. After pausing and likely winding down its Italian plant project, Automotive Cells Company (ACC) is struggling to deliver.
Technical issues have dogged the only operational site in Billy-Berclau, in Northern France, from problems mixing raw materials to faults in automated assembly.
Some of these defects are said to have caused charging failures in vehicles supplied from the plant, including DS N°8. This prompted the plant to conduct structural inspections on every unit rather than rely on standard sampling.
Support from China
In an effort to stabilise production, ACC has reportedly sought support from seasoned Chinese cell maker EVE—a painful concession for a project billed as a cornerstone of European industrial sovereignty. Output has crawled to around 10,000 battery packs a year, well short of the 50,000 promised three years after construction began.
Another problem for ACC is that it committed heavily to costly nickel–manganese–cobalt (NMC) chemistries just as global demand swung toward cheaper lithium iron phosphate (LFP) cells.
Mercedes has few alternatives but to look abroad to secure the volumes, as it faces the broadest product expansion in its history. By the end of 2027, it will have launched 17 additional BEV models, predominantly equipped with Asian packs, as the new deal sets the pace.
