Industry Overlap
Recently, the secondary battery industry and the automotive industry have been competing for leadership in battery packs. While battery companies prefer turnkey supply from battery cells to modules and packs, the automotive industry has a position that it cannot lose out on the lead in manufacturing vehicle battery packs to battery companies.
Tesla is in talks over the acquisition of Canadian lithium company Sigma Lithium, according to sources in the battery industry and foreign media reports on May 23. Industry insiders believe that Tesla is highly likely to acquire Sigma Lithium and take part in the lithium production process.
In February, General Motors (GM) invested US$650 million (about 800 billion won) in lithium mining company Lithium Americas to acquire a 10 percent stake in the company. Mercedes-Benz signed a deal with Canada’s Rock Tech Lithium last year to buy an average of 10,000 tons of lithium per year, while BMW signed a six-year lithium purchase agreement with Australia’s European Lithium. Hyundai Motor Group also started operating the Material Council as a supply chain management unit last year.
The automakers’ mine investments reflect their will not to cede the lead in EVs to the battery industry. This is because they believe that if they enter the EV era without their own battery technology or production, the battery industry will have a major influence on their business activities. Therefore, most automakers purchase only battery cells from battery companies and rarely order battery packs.
In the past, the GM Chevrolet Volt unveiled at the 2009 Detroit Motor Show in the United States was manufactured at GM’s Detroit plant in the United States after LG Energy Solution (known as LG Chem at the time) supplied battery cells for the EV model. But as EVs become more popular, battery packs are being assembled in joint ventures between the two companies. In effect, they reached a compromising arrangement, with neither side willing to relinquish control.
The battery industry is still hoping to supply battery packs. The three major Korean battery makers -- LG Energy Solution, SK On and Samsung SDI -- are continuing to develop battery pack technologies such as battery management system (BMS) technology. LG Energy Solutions has more than 24,000 patents on materials, processes, and core technologies. About 40 percent of these patents are related to systems such as the battery management system (BMS).
Last year, SK on successfully developed a battery management integrated chip (BMIC), which is the brain of a battery. Samsung SDI has developed a prototype of a next-generation BMS that provides a more accurate picture of battery conditions.
The battery industry is also beginning to strike back. China’s CATL, the world’s largest producer of electric vehicle batteries, aims to commercialize cell-to-chassis (CTC) technology in 2025. CTC is a battery packaging technology that directly combines a battery cell with a chassis. CTC technology can integrate all of the motor, CD, and on-board charger (OBC) components of an electric vehicle. This optimizes the power distribution of an electric vehicle and saves power while extending the electric vehicle’s mileage to more than 800 kilometers.
“Automakers’ acquisition of mines is to internalize batteries and eliminate margins in the battery industry,” said a source in the automotive industry. “The rise of electric vehicles is both an opportunity and a crisis for the automotive industry. There may come a time when battery companies will be able to make automobiles if they want to.”
Tesla and Panasonic set the first joint venture between the automotive and battery industries. Panasonic will produce battery cells, which Tesla will use to make battery packs to complete batteries for the Tesla Model S. The two companies established a joint venture called a gigafactory to produce the battery packs.
Over time, however, Panasonic’s status as an equal partner with Tesla has fallen. As Tesla is pushing for internalizing batteries, new 4680 cylindrical batteries are being made not only by Panasonic but by other companies such as LG Energy Solution and Samsung SDI.
The problem is that Korean battery companies are following the same path as Japan. Currently, the three major Korean battery makers, along with automakers, are investing 80 trillion won (US$61 billion) to build more than 30 new factories around the world.
Some experts point the finger to battery packs as an alternative to enable the Korean battery makers to win their competition with Chinese battery makers, which resort to a price war. The Korean battery industry needs differentiated technologies, so they need to produce battery packs as their production requires battery cells, the BMS, power semiconductors, and power software, they say.
“Currently, there is a shortage of batteries, so battery suppliers have an advantage over automakers,” said a battery industry insider, “But in 10 to 20 years, when the technology is leveled and battery prices fall, automakers will be able to take all of the added value from electric vehicles.”