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Automakers have battery anxiety, so they’re taking control of the supply

‘The batteries don’t show up, you’re bankrupt, you’re dead’

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04 Porsche Taycan 4S
Image Credits: Porsche AG

Battery joint ventures have become the hot must-have deal for automakers that have set ambitious targets to deliver millions of electric vehicles in the next few years.

It’s no longer just about securing a supply of cells. The string of partnerships and joint ventures show that automakers are taking a more active role in the development and even production of battery cells.

And the deals don’t appear to be slowing down. Just this week, Mercedes-Benz announced its $47 billion plan to become an electric-only automaker by 2030. Securing its battery supply chain by expanding existing partnerships or locking in new ones to jointly develop and produce battery cells and modules is a critical piece of its plan.

Mercedes, like other automakers, is also focused on developing and deploying advanced battery technology. In addition to setting up eight new battery plants to supply its future EVs, the German automaker said it was partnering with Sila Nano, the Silicon Valley battery chemistry startup that it has previously invested in, to increase energy density, which should in turn improve range and allow for shorter charging times.

“This follows a trend that we’ve seen of automakers realizing how critical the battery is and taking more control of the production of the cells in order to ensure their own supply,” Sila Nano CEO Gene Berdichevsky said in a recent interview. “Like if you’re VW, and you say, ‘We’re going to go 50% electric by whatever year,’ but then the batteries don’t show up, you’re bankrupt, you’re dead. Their scale is so big that even if their cell partners have promised them to deliver, automakers are scared that they won’t.”

Tesla, BMW and Volkswagen were early adopters of the battery joint-venture strategy. In 2014,Tesla and Panasonic signed an agreement to build a large battery manufacturing plant, or a gigafactory as everyone is now calling it, in the U.S. and have worked together since. BMW began working with Solid Power in 2017 to create solid-state batteries for high-performance EVs that could potentially lower costs by requiring less safety features than lithium-ion batteries.

In addition to its partnership with Northvolt, VW is also in talks with suppliers to secure more direct access to supplies like semiconductors and lithium so it can keep its existing plants running at full speed.

Now the rest of the industry is moving to work with battery companies, to share knowledge and resources and essentially become the manufacturer.

Regional security

For automakers, these deals are positioned to not only secure batteries; these companies also want to ensure regional supply chains are either established or maintained in an effort to avoid relying on sources located farther afield.

Mercedes’ strategy around battery supply illustrates those concerns. The German automaker has determined it will need battery capacity of more than 200 gigawatt hours to supply its EVs. To meet that need, Mercedes said this week it will build eight new battery plants, in addition to the already-planned network of nine factories that will be dedicated to building battery systems.

The company is locating these battery plants, which will be built and operated with new and existing partners, near its automotive assembly factories. Four of the newly announced ones will be in Europe to ensure the region “remains at the heart of the auto industry.”

“There’s kind of this intrinsic property of batteries, which is that they’re really heavy for the value,” said Berdichevsky. “You can’t air freight them because that’s not safe, and you can’t ship them overseas because no one wants to have that much capital and inventory on the water for 40 days, so factories are going to be built on every continent that makes EVs. So I think what’s actually really important is where the factories go, and less important where the factory’s from. If a Chinese company puts a battery factory in the U.S., even if relationships get real tense, it’s in the U.S. If you have a factory in China, that could be a Chinese factory one day when you wake up.”

In short, national security is playing a role here, and we’re seeing that manifest in financial backing from governments. The German government has supported the financing of the VW-Northvolt plant, as well as Mercedes-Benz’s plans to build EV battery factories.

South Korea plans to invest over $35 billion in battery production over the next 10 years, according to a report from Bloomberg. China has long invested in processing the raw materials for EV batteries, and the Biden administration wants to make the U.S. a world leader in lithium-ion production.

Batteries 101

Understanding how batteries are manufactured can help explain why joint ventures are becoming more common.

Picture a battery pack that powers a vehicle. Battery packs in vehicles today are made up of lithium-ion cells, which contain an anode (negative) ion on one side and cathode (positive) ion on the other. An electrolyte sits in the middle and shuttles the ions between the electrodes when charging and discharging. (Berdichevsky likes to describe these as layers in a pyramid, with the vehicle at the top, followed by the pack, then the cells, and finally the chemistry, so choose whichever visual suits you best.)

Automakers have historically produced their own packs. Now they’re partnering with cell manufacturing companies like Panasonic, LG Chem and SK Innovation or build their own battery cell factories so they can control that process themselves.

Companies like Sila Nano or BASF, which Porsche just announced as its exclusive partner for producing the materials needed for its high-performance batteries, operate at that foundational chemistry layer. It’s the technology behind their anode and cathode configurations that may determine how cheaply automakers can produce cells, and thus batteries, as well as how fast those batteries can charge and how much range they’ll provide.

Battery joint ventures: A roundup

Porsche, Customcells and BASF

Porsche announced in June plans to open a factory that will produce high-performance cells through a joint venture with lithium-ion battery developer Customcells. The joint venture, called Cellforce Group GmbH, isn’t focused on producing cells for Porsche’s mainstream EV vehicle the Taycan or its variants.

The factory, which is funded by Porsche with €60 million ($71.4 million) from the German government and the state of Baden-Württemberg, will instead produce the special-purpose cells for motorsports and high-end cars.

Chemical company BASF SE was selected to supply the cathode materials.

Toyota and Panasonic

The two Japanese companies have been involved in a joint venture called Prime Planet Energy & Solutions (PPES) since 2019. Their original goal was to establish a new line in the existing Panasonic factory in Tokushima that would manufacture batteries for 500,000 hybrid vehicles per year.

Last week, Toyota and Panasonic announced a plan to lower the cost of materials needed to make batteries, like cobalt, lithium and graphite. PPES, led by former Toyota executive Hiroaki Koda, aims to cut costs of prismatic lithium-ion batteries by up to 50% by 2022 and 65% to 75% by 2025. Bloomberg, which first reported on the news, found 60% of that cost is related to resources, while the remainder comes from development, production and investments.

The company said it hopes to quadruple its EV sales to 8 million units in 2030, and it will add two electric cars and one hybrid to its lineup this year.

Ford and SK Innovation

In May, Ford Motor Company and SK Innovation, a Seoul-based petroleum company, signed a memorandum of understanding to establish a joint venture to domestically manufacture battery cells for EVs. The goal of the venture, BlueOvalSK, is to produce 60 GWh annually for Ford and Lincoln vehicles starting in 2025 via two plants that will be located in the U.S.

Ford also announced it would be upping its investment in electrification from $22 billion to $30 billion, using some of that capital to create Ford Ion Park, a battery R&D center in Michigan. Ion Park will house 150 battery experts to create a game plan for the next generation of lithium-ion chemistries and Ford’s new energy-dense battery technology in the hopes of boosting battery range and lowering costs.

Ford anticipates 40% of its global vehicle volume to be fully electric by 2030, and 100% of its passenger vehicle portfolio in Europe will be zero-emissions by 2030. The automaker said it would be putting electric transit commercial vans on the road later this year, as well.

Ford and SK Innovation announce battery manufacturing joint venture BlueOvalSK

Renault, Envision AESC and Verkor

In June, Renault Group signed two partnerships to step up electric vehicle battery production. Its strategic partnership with Envision AESC, a lithium-ion battery manufacturer, involves a €2 billion investment from the battery arm of the green tech company Envision Group.

The French automaker is also working with battery cell startup Verkor, which has recently raised €100 million to develop EV batteries in France. The fundraise was co-led by EQT Ventures and Renault Group, with participation from the French Government and Auvergne-Rhône-Alpes Region. Verkor is starting construction on its first gigafactory in 2023 and, per the terms of a memorandum of understanding, will allocate 10 GWh of its initial production of 16 GWh to Renault. Verkor hopes to target an annual capacity of 50 GWh by 2030, 20 of which will go to Renault.

Renault has an ambitious EV strategy, aiming for 65% of its sales to be electrified by 2025 and 90% fully electric by 2030. The automaker plans to release 10 new electric models by 2025.

GM, SolidEnergy Systems and LG Chem

In April, GM and LG Energy Solution, a subsidiary of LG Chem, announced plans to build a second U.S. battery cell factory in Tennessee that would supply the automaker with the cells it needs to fuel the 30 EV models it hopes to launch by 2025. The joint venture, dubbed Ultium Cells, aims to have production capacity of more than 70 GWh.

GM’s proprietary Ultium platform and batteries are at the heart of the automaker’s shift to EVs. It says its batteries use less rare-earth material like cobalt and feature a single common cell design that translates to a more energy-dense battery packed into a smaller space.

While this factory is new, the relationship has been ongoing since 2009, when LG Chem began supplying batteries and electronics to GM. The partnership further developed when GM launched the Chevy Bolt EV, and the initial joint venture to mass produce battery cells began in 2019.

GM announced a partnership in March with solid-state battery startup SolidEnergy Systems to improve the energy density of its batteries. The two plan to build a prototyping facility in Woburn, Massachusetts that will build high-capacity, anode-free lithium metal batteries, aiming for a pre-production battery by 2023.

GM’s second $2.3B battery plant with LG Chem to open in late 2023

 

Hyundai and LG Energy Solution

Hyundai Motor Co. and battery manufacturer LG Energy Solution plan to announce a joint venture to build an EV battery plant in Indonesia, a country with rich natural lithium resources and a major Southeast Asian market. The two Korean companies will invest $870 million to $1.1 billion (1 trillion to 1.3 trillion won) in the plant with the aim of producing 10 GWh annually. Construction of the plant is expected this year, with mass-production scheduled for 2023.

This joint venture coincides with Hyundai’s plan to create a car factory in Indonesia this year, as well, with plans to mass-produce certain EVs for the ASEAN market stating next year. The automaker aims to sell 1 million EVs by 2025. It’s already electrified its Kona and Ioniq, and it’s produced the fully electric Ioniq 5 SUV.

Stellantis and Total

In 2020, automaker Stellantis and energy company Total formed a joint venture to develop battery cells called Automotive Cells Company (ACC). Earlier this month, Stellantis announced a plan to source over 260 GWh of battery capacity by 2030 through its five gigafactories in Europe and North America.

The company is targeting over 70% of sales in Europe and 40% in the U.S. to be low-emission by 2030, and 14 of the auto giant’s brands are committed to offering fully electric vehicles. Stellantis also said it signed memorandums of understandings with two unnamed lithium geothermal brine process partners in North America and Europe so it could ensure its lithium supply.

Rivian and Samsung SDI

In April, Rivian announced its partnership with Samsung SDI to be its battery cell supplier. The EV company said its anticipated R1T pickup and R1S SUV would need a battery module and pack that could handle extreme temperatures and durability use cases.

On Thursday, Rivian confirmed its plans to build a second U.S.-based car manufacturing plant that would include battery cell production, so we might expect to see another joint venture in the young EV company’s future.

Giving EV batteries a second life for sustainability and profit

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