The EVolution #13: Behind every great EV...
...are CATL, LG, Panasonic, or a handful of other battery suppliers
In the burgeoning world of battery-powered electric vehicles, consumer-facing car brands command the lion’s share of attention. But the major EV automakers, including Tesla, Volkswagen, and Ford, are all dependent on their partnerships with a handful of battery suppliers. These suppliers operate in a world for which explosive growth is forecast, but competition is intense and the supply chain is fragile.
Risks include the product possibly, um, catching on fire:
That’s right. In the past week, in an acknowledgement of “manufacturing defects,” South Korean battery manufacturer LG agreed to shoulder virtually all of the ~$2 billion cost of General Motors’ complete recall of every Chevy Bolt ever made.
It’s a good time to take a look at who’s making the most critical component of our next generation of vehicles. Six suppliers, all based in East Asia, provide nearly 90% of all battery capacity currently being deployed in electric vehicles:
CATL
There aren’t too many $200 billion market cap companies that one could argue fly under the radar! Yet, while the battery supply industry includes some divisions or spin-offs of well-known technology conglomerates, the market leader is a Chinese company called Contemporary Amperex Technology (“CATL”). They are the primary supplier to Volkswagen and have become an important part of Tesla’s diversification strategy, enabling the latter to deploy lithium-ion-phosphate (“LFP”) batteries in its made-in-China vehicles.
LG
Despite the high-profile Chevy Bolt recall, LG is a key partner to General Motors and several other carmakers. The Korean supplier has a reputation for technological sophistication. It is expected to debut for Tesla an advanced new battery chemistry, called NMCA, which offers better efficiency and a lower cost. Crucially, it also reduces dependence on cobalt, a raw material “often sourced in suspect conditions” for use in EVs, laptops, mobile phones, and more.
From a 2016 Washington Post investigation:
An estimated 100,000 cobalt miners in Congo use hand tools to dig hundreds of feet underground with little oversight and few safety measures... Deaths and injuries are common. And the mining activity exposes local communities to levels of toxic metals that appear to be linked to ailments that include breathing problems and birth defects.
Panasonic
Panasonic is Tesla’s original battery supplier and still produces the vast majority of their batteries. Tesla’s vaunted “Gigafactory” in Nevada is a partnership between Tesla and the Japanese titan to produce an enormous number of batteries at scale. In Power Play, a new book on Tesla’s founding which I recently read, Tim Higgins describes its genesis:
It was an audacious plan: a factory to be built in phases, adding capacity as needed. It would cost as much as $5 billion, comprising 10 million square feet under a single roof (making it larger than the Pentagon). The facility would require as much as 1,000 acres of land and employ 6,500 people… Panasonic would essentially be setting up shop inside a Tesla factory to build cells at one end, while Tesla assembled battery packs at the other.
Samsung SDI
After CATL, LG, and Panasonic, there’s a bit of a stepdown in market share for the next three—at least for now. One bright sign for South Korea-based Samsung SDI’s prospects is that they are the supplier to Rivian for its new SUV and pickup truck. Rivian, an emerging new EV manufacturer, notably has an upcoming IPO which may value the company at $80B, and stellar early reviews of its first cars.
BYD
Unlike the other companies discussed here, China’s BYD is an EV manufacturer and makes the batteries they use in their own vehicles. They have a minor partnership with Ford, and rumors have long circled linking them to Tesla, but for the most part BYD is a go-it-alone player.
SK Innovation
How do you say “sorry” in corporate? I think it’s pronounced something like “1.8 billion dollars”… See, earlier this year, smaller Korean upstart SK finally settled a bitter legal/regulatory dispute with LG. The latter had accused the former of stealing trade secrets and key employees. The fight threatened the EV expansion plans of both Ford and Volkswagen, and became a thorny issue for the Biden administration—but all’s well that ends well.
In a neat and tidy coincidence, the sum LG is receiving from SK is about how much LG is paying out to General Motors for the Bolt fires…
It’s now full speed ahead for Ford and SK to build multiple plants across Kentucky and Tennessee that they say will enable Ford “to power 1 million electric vehicles annually”!
Maybe an American battery manufacturer based in West Virginia would solve all of our infrastructure/political problems