To make cheap EVs successful, automakers have replaced decades of knowledge with a playbook from Tesla.

Tesla’s approach to battery sourcing might be an example for automakers. This is the Hummer EV’s battery. Mandel Ngan/Getty Images
The demand for EV batteries is greater than ever but costs are rising. This follows the trend of Tesla’s long-standing practice.

Auto companies are making every effort to make electric cars more affordable, despite rising battery prices.

To make that happen, they may have to forget much of the information they’ve learned over a century about supply chains and replace it with some pages from Tesla’s book.

Automobile manufacturers have explored new types of batteries in an effort to reduce their dependence on traditional lithium-ion systems. They have also increased their battery recycling efforts, and are working to bring back lithium, nickel and cobalt into the supply chain.

These solutions have their limitations in terms of cost and timing, at least for the short term. Car companies are looking for an alternative and racing to secure their US battery supply.

This means that you need to invest in battery material sourcing and battery production in order to lessen the disruptions caused by the pandemic.

Peter Maithel (Infor’s principal analyst for the auto industry), stated that almost all major companies invest in this because they want to vertically integrate and have more control over their supply chains.

Volkswagen is building a battery cell factory at its Salzgitter site for its planned large-scale production of the Group’s own battery cells.Julian Stratenschulte/picture alliance via Getty Images

Is there a rush?

Car companies have relied on many suppliers to supply their components. While some of the key components might be from the USA, others could come from Europe or Asia.

The breadth and depth of these supply chains has historically reduced the possibility of bottlenecks. The pandemic and other disruptions like natural disasters have shown how vulnerable this can make auto companies. Even a small disruption could cause a major downtime in an auto parts plant around the globe.

The advent of EVs and the nuances of sourcing for them have brought these concerns to the forefront on automaker to-do list. Particularly, the US has depended on foreign suppliers for its battery supplies, components, processing, and other requirements. China has meanwhile enjoyed a competitive advantage in terms of having access to the raw materials needed for EVs, as well as controlling the production of many of the world’s batteries, packs and other products.

However, companies are vulnerable to any unforeseen disruptions like COVID-19 and geopolitical issues. This has encouraged them towards closer manufacturing. This summer’s climate law has driven a push to end the global supply chain model.

“We’ve just witnessed an unprecedented amount, joint development agreements and early supply contracts from the automobilemakers with battery material providers, with battery manufacturer,” stated Matt Sculnick (executive director of Nomura GreenTech’s advanced transportation team). “In a collaborative manner that I don’t think we’ve seen, we’ve seen an unprecedented amount of announcements.”

Rivian produces its EVs here in Illinois.

The good news is that EV users will eventually be able to adopt them.

Vertical integration is what Tesla is known for.

Tony Lynch, Alvarez & Marsal managing Director, stated that Tesla was always the groundbreaker in this area, going straight to the source, going to the mines, and negotiating supply agreements with them.

This has given Tesla an advantage over GM and Ford in terms of visibility into production. GM and Ford are scrambling to get in on US mining and manufacturing deals.

Although it’s time-consuming and complicated, this may be the best way for car companies to lower the cost of EVs. According to Kelley Blue Book, those were at $65,041 in November — a drop from $48,681 for a new gas-powered vehicle during the same time period.

Supply will be reduced if there is more supply, especially in the US.

Business Insider has the original article.
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By: astjohn@insider.com (Alexa St. John)
Title: To make cheap EVs work, automakers are replacing decades of know-how with a move from Tesla’s playbook
Sourced From: www.businessinsider.com/auto-companies-copy-tesla-succeed-electric-vehicles-batteries-2022-12
Published Date: Thu, 15 Dec 2022 09:27:00 +0000