The battle for dominance in electric vehicle batteries is fierce between automakers and battery makers. Recently, automakers have begun declaring their own development of EV batteries.
On April 27, Ford emphasized the need to “internalize the battery” to survive in the electric vehicle market and formalized its own battery production plan. In Detroit, Michigan, the US invested $185 million (about 206 billion won) to establish a battery research and development center called ‘Ford Ion Park,’ and announced that it would develop its own lithiumion battery there. Tesla and Volkswagen declared that they would directly procure a large part of EV batteries within 10 years, and General Motors (GM), BMW, Porsche, Toyota and Hyundai Motors also declared their own development. Why are automakers eager to develop their own EV batteries?
First, the high cost of electric vehicle batteries is behind the strong winds for battery internalization. The proportion of batteries in the price of electric vehicles reaches 30-40%. Minimizing battery prices is directly related to operating profit. In an internal combustion engine car, a single component has never had such a high proportion. In the electric car war, you have to take the lead in the battery to win.
Automobile companies engaged in government subsidies, etc.
It also aims to utilize government subsidies. Volkswagen, the world's No. 1 automaker, recently announced that it will expand 6 battery factories in Europe by 2030 to produce 240GWh battery cells per year. This is possible because Europe is pouring subsidies to build the battery supply chain. According to Bloomberg, European subsidies for electric vehicle batteries have increased tenfold in one year to 6.1 billion euros (about 8.9 trillion won). International credit agency Standard & Poor's (S&P) forecasts that Europe's share of global battery production will increase from 6% in 2020 to 25% in 2025.
It is also to put pressure on battery makers. Lowering battery prices and increasing supply is a hot topic for automakers. Accordingly, the purpose of automakers is to tense battery makers, which are currently competing for battery orders, and to obtain future cooperation or negotiate price reductions. When automakers develop their own batteries, they can gain an advantage in price negotiations because they can learn various battery development cost information and issues.
Lastly, batteries are needed to maintain competitiveness as a car maker. The battery took over the role played by the engine in an internal combustion engine vehicle. If the situation where these parts are continuously purchased from outside is left unattended, automakers may fall into a situation where they buy parts and simply assemble them. In the era of electric vehicles, automakers have no choice but to develop and produce their own batteries.
Can automakers develop and produce batteries themselves? Even if it is possible, would it be efficient to develop and produce it yourself? How should automakers and battery makers target the EV battery market with selection and concentration?
Technically, it is difficult for automakers to narrow down the current achievements achieved by leading battery makers through decades of trial and error and astronomical investments in a short period of time. This is evidenced by the fact that top tier battery makers have been researching for more than 20 years and accumulating about 10 years of mass production experience. It is almost impossible to produce batteries by circumventing the patented technology of battery leaders.
Making it technically good is not the end. Mass production is also difficult. It took at least several years for a top tier battery maker to succeed in actual mass production after developing the technology. Achieving mass production capability is another task separate from technology development.
Even if a car maker is commercialized with battery research that has just begun, low-quality basic products will come out, so time to market (time to market: the time it takes from the development of a product development concept to making a product and selling it in the market) long behind Since high-quality batteries have many sensitive issues such as durability and stability, it takes considerable time to develop and mass produce them. Moreover, it is not a prior technology development, and there is no room for leisurely focus on research because there is a shortage of batteries in the global market right now.
In case of in-house development, it is difficult to secure customers outside of the company
What about the cost side? Automakers will install their own batteries in their cars. For example, it means that EV batteries produced by Volkswagen will be installed in Volkswagen, but it will be difficult to install in GM or BMW. Given the profitability issue, this is not a business that remains. Automobile makers cannot attract multiple automakers that will combine their established production lines and production technologies like battery makers. One-source multiuse is not possible. To recoup the investment, you have to sell more batteries than cars, which is difficult.
In May 2020, GM established Ultium Cells, a joint venture with LG Energy Solutions, and is building a battery plant with an annual capacity of 30GWh in Ohio, USA. In the future, it is decided to build a second factory in Tennessee at an additional cost of $2.3 billion (about 2.54 trillion won). Tesla is already working with battery makers LG Energy Solutions and Panasonic despite the declaration of internalization of batteries. Volkswagen has partnered with Swedish battery maker Northvolt. Many automakers already know that this method is the most realistic, not a complete in-house development.
In the future automobile industry, organic collaboration with other industries such as information technology (IT), communication, and service is emphasized. Horizontal integration has become important. Each of us has a field we are good at, and collaboration with the best in that field can save both time and money. It is clear that a joint venture between a car maker and a battery maker and a merger and acquisition (M&A) method are much more efficient than the car maker's own development.
The number of chargers in Korea is absurdly short. it's blue ocean The number one requirement for electric vehicle customers is always fast charging. Volkswagen is said to have partnered with an electric vehicle charging service provider to build an infrastructure of 17,000 fast charging stations by 2025. Hyundai Motor Company will also introduce a ‘pickup and charge service’ that picks up a vehicle from a customer’s desired location and delivers the vehicle back to the customer after charging up to 80%.
Access to charging is also rapidly increasing in all areas of living space. An old public phone booth has recently been transformed into an electric vehicle charging station. Gas stations and convenience stores are also spurring EV charging services. Large scale charging infrastructure is not the only answer. In this way, collaboration with ‘niche space charging stations’, which are easily accessible by individuals, can also be a good market.
In fact, charging revenue is also a profit, but rather than that, the core of this business is that it can collect charging big data, which accumulates information about when, where, how, how much, and with what problem users charge electric vehicles. This is because the quantity and quality of the charging big data accumulated here is excellent. From customer facing service categories such as consumer reaction to the charging infrastructure service itself, electricity storage status in a specific region, information on charging stations with ready-to-use chargers, electric vehicle usage patterns, battery life, and charging time, to battery technology engineering categories. Various big data are collected. With this big data, the current food can be improved and the next food can be discovered. This is why this business can be called a 'smart energy management business' rather than a 'charging infrastructure business'.
