Visitors use their mobile phones next to a 5G advertising banner during the GSMA's 2022 Mobile World Congress (MWC), in Barcelona, Spain, March 2, 2022.
Visitors use their mobile phones next to a 5G advertising banner during the GSMA's 2022 Mobile World Congress (MWC), in Barcelona, Spain, March 2, 2022. Reuters / ALBERT GEA

South Korea's LG Energy Solution plans to build a battery factory in Arizona to supply to Tesla and other customers, two persons familiar with the matter told Reuters.

The U.S. factory is expected to produce cylindrical battery cells of different sizes, for customers, including EV makers Lucid and Proterra and Philip Morris, maker of IQOS heated-tobacco sticks, one of the persons said.

Another person said startups like electric scooter makers will use batteries from the factory.

Tesla CEO Elon Musk said on Tuesday that battery production would be "the limiting factor" for vehicle production in two to three years, as the world's largest electric vehicle maker aims to boost sales. He has called on suppliers to raise production, while Tesla starts making cells itself.

LG did not immediately respond to Reuters' request to comment outside normal business hours. Tesla, Lucid, Proterra did not immediately respond to request for comment. Philip Morris declined to comment.

Japan's Panasonic Corp, one of Tesla suppliers, along with Contemporary Amperex Technology Co, is also looking to invest billions of dollars to build a factory to make a new type of electric vehicle (EV) battery for Tesla Inc, public broadcaster NHK reported earlier this month.

Panasonic is looking at building the factory in either Oklahoma or Kansas, not far from Tesla's new Texas vehicle plant, NHK reported.

Sherry House, CFO of Lucid, which has a car factory in Arizona, told Reuters last month that it had signed multi-year supply agreements with two battery suppliers, and the agreement "does have some capacity coming from state-side cell lines."

She did not identify the companies. Lucid sources batteries from LG and Samsung SDI.

LG, which raised more than $10 billion in its initial public offering in Korea in January, has announced a flurry of battery joint ventures with GM and Stellantis in the United States and Canada.

In August, U.S. President Joe Biden signed an executive order aimed at making half of all new vehicles sold in 2030 electric.