SAN FRANCISCO, California: By venturing into developing advanced battery cells for EVs and energy storage systems by 2023, sources said LG Energy Solution hopes to sign Tesla Inc electric vehicles as potential customers.

The Korean battery maker admitted evaluating potential production sites in the United States and Europe to serve U.S. and global customers, as well as startups.

Tesla, on the other hand, has not yet agreed to a deal that would expand LG's role in its supply chain beyond China, the sources said.

In September, Tesla Chief Executive Elon Musk announced an ambitious plan to develop the company's own new cells, meant to reduce production costs, improve battery performance and increase driving range, which would eventually boost electric vehicle production around the world.

This prompted suppliers, such as LG and Panasonic, to explore the unproven technology or risk losing a major customer.

Although the Korean supplier, a unit of LG Chem, has developed samples of the 4680 large-format cylindrical cells, it faces technological hurdles and the challenge of scaling up production, sources said.

"LG plans to produce 4680 cells at its new U.S. factory. They plan to build a new 4680 cell line to supply Tesla's Giga Berlin in Europe," the source said, adding that Spain was being considered as a location for one of the European plants.

Sources noted that although LG has never produced such large-format cylindrical cells on a large scale, increasing the battery capacity was the smart choice. "Tesla is a major customer and LG can take risks," another source said.

Tesla has not yet ordered the 4680 cells, still under development, from LG, but is increasing orders for the 2170 cells used in the Model 3 and Model Y vehicles made in China.

Musk revealed that Tesla is in talks with battery suppliers about developing 4680 batteries, and the company is currently running a pilot factory for the new battery cells in California. It is also preparing to build those cells at newer plants in Texas and Germany.

LG currently supplies smaller cells to Tesla in China, along with Chinese battery maker CATL.

Panasonic has partnered with Tesla in a $5 billion battery "gigafactory" near Reno, Nevada.

Tesla may need to push out the timeframe for mass production or work with partners at its newer plants in order to ensure cell production is up and running quickly, said Caspar Rawles, an analyst at researcher Benchmark Mineral Intelligence.