The Battery-Deal Beat Goes on

July 1, 2020

Lindsay Brooke

The predominant LFP battery production capacity in China is driving the shift in that market by Tesla and other OEMs away from NMC-type cells to the LFP chemistry. IHS Markit expects the shift to LFP will expand local production in other regions.

The dynamism and in some cases, unpredictability, of the EV battery market show no signs of settling down. And despite “the battery Big 3” (LG Chem, CATL and Panasonic) collectively commanding nearly two-thirds of the market, OEMs remain committed to multi-source cell supply, creating opportunity for second-tier and start-up players. All are looking for technical superiority that results in competitive advantage. Recent deals include:

Tesla and CATL

To ensure that his company succeeds in China, Tesla’s boss turned to a battery engineer who once helped Apple extend the life of its MacBook laptop. Zeng Yuqun built Contemporary Amperex Technology Co. (CATL) into China’s battery leader in less than a decade, creating the largest global producer of rechargeable cells for plug-in vehicles. CATL’s lithium-iron-phosphate (LFP) cells are now powering Tesla Model 3s built at the automaker’s plant near Shanghai. The LFP cathodes use a less costly mix of raw materials and cost about 20% less to produce than other common types of packs, according to BloombergNEF. The Tesla deal comes at a crucial time for CATL: Battery sales fell almost 33% in the first five months of 2020, according to SNE Research, as car purchases plunged in China amid the pandemic, trade war and a scaling back of Beijing government subsidies. CATL’s domestic market share also fell as Tesla initially equipped its China-made Model 3s with batteries from LG Chem and Panasonic.

Honda and CATL

Honda is acquiring a 1% stake in CATL as part of a deal to jointly develop EV batteries and research a joint battery-recycling enterprise. Honda is expected to launch its first EV equipped with CATL’s li-ion battery in China in 2022. CATL also supplies Toyota and Volkswagen; Honda has various partnerships to make EVs, including a joint venture with China’s GAC. It also has supply contracts with Hitachi to develop, produce and sell electric motors for hybrids and BEVs. In North America, Honda is partnering with GM to develop two new EVs as well as hydrogen fuel cell technology. CATL also has a battery plant in Germany and is considering construction of a plant in the U.S.

BMW and Northvolt

BMW recently signed a deal with Northvolt for €2 billion worth of lithium-ion battery cells to power the automaker’s electric vehicles. Sweden-based Northvolt was started by two former Tesla executives. It will manufacture the cells at a new plant in northern Sweden and deliver them in a long-term contract beginning 2024. European OEMs including BMW have moved to source EV batteries with regional suppliers in order to lessen their dependence on the big-3 Asian giants. BMW’s product portfolio is expected to include 12 EVs by 2023. Northvolt becomes BMW’s third major cell supplier, along with Samsung SDI and CATL.

Daimler and Farasis

Daimler is expanding its strategic partnership with China-based Farasis Energy, a deal which includes taking an equity stake of about 3% in the battery cell maker. The alliance aims to develop advanced cell technology to increase vehicle range and reduce charging times. Farasis, an existing cell supplier for Mercedes-Benz EVs, will build a plant for battery cells in Bitterfeld-Wolfen, Germany, aimed at Mercedes’ next-gen EQ vehicle range. The arrangement will enable Daimler to have a seat on Farasis’s supervisory board.