Automotive is investing billions of dollars in bringing new electric vehicles to consumers in the United States and other global markets, but their success depends on securing the most important and expensive part: the battery.
A
handful of companies based in China, Japan, and South Korea make
automotive-grade battery cells, which has disturbed the traditional dynamics
between carmakers and spare parts suppliers. These battery companies - although
little known to the general public and relatively new to the auto industry's
vast supply chain - are key to the manufacturers' goals of bringing dozens of
new EV models to US showrooms by 2025.
"Vehicle
makers don't have enough batteries to live up to their short-term
commitments" said Sam Jaffe, managing director of Karen Era, an energy
storage firm in Boulder, Colorado. "A lot of battery factories are being
built. But there is a problem with the battery supply shortly. All
the car companies coming on this occasion are suppressing.
Intellectual
property tensions, logistics, production delays, and battles have increased
tensions between this new generation of carmakers and suppliers, who benefit
far more than suppliers of camshafts, mufflers do and pistons do. The auto
industry's sudden embrace of EVs can lead to more incidents, such as recent
memories of four different models of battery fire hazards.
To
avoid the possibility of Germany, Ford Motor Company, again one of the companies
now has to work with other carmakers to meet European emissions regulations.
'Disruptive
supply disruption'
Although
battery manufacturers may increase output in the short term, shortages are a
major problem. Volkswagen AG unit Audi had to suspend production of its e-Tron
in February, and Tata Group's Jaguar Land Rover Automotive PLC, which had
earlier this month cut off production of the I Pace due to disruptions with
battery-supplying LG Chem Limited. Had suspended
Ford
and VW have warned that a legal dispute over trade secrets between LG Chem and
South Korean co-producer SK Innovation could "disrupt catastrophically
supplies." The US International Trade Commission is expected’ to issue a
review of the dispute on October 26.
According
to a research report by UBS Securities on October 21, the cost of an EV in
batteries alone range from half to one-fourth, and the top six suppliers
controlled 87% of the global market last year. "Despite China's growing
exports, we expect the overseas battery market to remain strong," he said.
Battery
providers are wary of over-committing any single auto car and are willing to
pay the billions of dollars they have spent on production lines around the
world. Many are hedging their stake by entering into agreements with more than
one partner. The small club includes two South Korean rivals, China's
contemporary Amprix Technology Company and Japan's Panasonic Corporation.
"Battery
suppliers can be great with their OEMs," said Nathalie Capti, a former
battery engineer at General Motors and Apple Inc., who now runs Battery Lab, a
consulting firm in San Francisco. "There are only a few cell suppliers
that can meet their standards and volume. Nowadays, car manufacturers are at
the mercy of cell suppliers.
Tesla
Cell Productions
Panasonic
has long been involved in hip-hop with Tesla Inc.: The two companies operate a
large-scale battery plant known as the Gig factory outside Reno, Nevada. Elon
Musk, chief executive officer, complained that the Japanese company was moving
at a rate that limited production of Tesla's Model 3 sedan. Panasonic is adding
the 14th battery cell production line to the Nevada factory, a move that will
increase production by 10 percent. But it doesn't look like Tesla: it also has
a joint venture with Toyota Motor Corporation.
"Today's
batteries can't scale fast," Musk, outlined the company's technology plans
at Tesla's "Battery Day" event last month. "There is a clear
path to success but there is still a ton of work to be done."
Tesla
also acquired batteries from CATL and LG Cam. But California-based carmaker
Palo Alto is in dire need of batteries and Kasseri is eager to wean a company
that relies on external suppliers. Tesla plans to build its cells on a pilot
line near its auto plant in Fremont, California and is building the building
in a new factory in Austin, Texas.
During
the horrific events of the environmental crisis, the EV push has made an
immediate new demand. European cities such as Madrid and Paris and the Canadian
province of British Columbia are among the powers that drive internal
combustion engines. And California, which is suppressing smoke from devastating
wildfires, announced last month that it would ban the sale of new
petrol-powered cars in 2035.
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