Nissan Close To Exiting Battery Business, AESC To Be Sold For $1 Billion

MAY 29 2017 BY MARK KANE 83

Over the past few years, we have seen Nissan push further and further away from building all its own batteries, instead talking up the fact it will procure cells where and when it makes the most sense (think LG Chem).

Now the Japanese automaker is close to selling its AESC (Automotive Energy Supply Corp.) manufacturing business based out of Japan to Chinese private equity firm GSR Capital.

2013 Nissan LEAF Battery Pack

The $1 billion deal is currently being finalized and expected to signed within two weeks.

GSR Capital is backed by Hubei province, which makes the acquisition pretty interesting.

Nissan currently owns 51% of the AESC (lithium-ion battery unit that supplied cells and modules for LEAF, e-NV200 and some of the Renault models). Remaining 49% belongs to NEC Corp.

“GSR Capital sees value in building an independent battery supplier to multiple automakers and is considering moving some of AESC’s manufacturing to Hubei, the people said. The central Chinese province — home to the Three Gorges Dam and the nation’s second-largest carmaker, Dongfeng Motor Group Co. — recently earmarked 547 billion yuan ($80 billion) for investments in areas like clean energy to modernize its economy.

“This deal would bring huge benefits to both sides,” said Takeshi Miyao, an analyst at Tokyo-based market researcher Carnorama. “China is planning to manufacture batteries in the country as they encourage use of electric vehicles and AESC would be a perfect target as it has good battery technology.””

AESC acquisition would be largest deal ever for a Chinese company in Japan, as total investment in 2016 amounted $700 million. So far this year it’s just $11.4 million.

As for who would be picking up some of the slack for future battery production in cars like the next generation LEAF (and its two other unannounced, but arriving by 2019 EVs) if Nissan in indeed out of the business?

Next Generation 60 kWh battery developed with LG Chem

We assume some component of the battery supply chain would still produced by AESC for a time (as part of this deal), but considering the forerunner of the 2018 LEAF, the IDS Concept’s 60 kWh battery pack was an LG Chem co-operative project, and then Nissan CEO Carlos Ghosn said this statement to the Wall Street Journal around the same time…it has to be LG Chem:

“We have opened to competition our battery business in order to make sure we have the best batteries. For the moment, we consider that the best battery maker is LG.

What prompted the change of heart for Nissan (and several other OEMs build, or with plans to build batteries themselves)?  The entire industry has been scrambling since LG Chem introduced and started taking orders for its $145/kWh battery cells in early 2015.  The return on investment to “build your own” seemingly vanished overnight.

As for Nissan’s actual battery facilities in the US and UK, those are apparently on the table for sale as well according to the Nikkei Asia Review.

“Nissan apparently is also in talks with GSR to sell its U.S. and U.K. facilities that make automotive batteries. The carmaker intends to exit operations employing existing lithium-ion battery technologies, while continuing research and development of next-generation batteries made with new materials.”

source: Bloomberg, Nikkei Asia Review, hat tip to Riff Raff!

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83 Comments on "Nissan Close To Exiting Battery Business, AESC To Be Sold For $1 Billion"

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It’s probably in Nissan’s best interest. They get a more reliable battery, probably with better energy density, and probably cheaper than they can produce it. When I look at the electronics industry, even when you take a mammoth company like Apple, they still source their batteries from other companies. I’d feel much better about a 2nd Gen Leaf if it used a LG battery cells and some thermal management.

Good point on the cooling aspect David. It seems likely with LG in charge that Nissan will need to have a better cooling scheme on LG’s insistence. Perhaps that is why Gen 2 Leaf is so late. That’s good news IMO.

At the time the Nissan/NEC deal made sense, back in 2010 people were talking but they needed it done. Fast forward now several companies make cells with higher capacity.

There seems to be a proper timing for events in making EVs, buy your cells, make your packs, eventually make you cells in cooperation.

There is no suggestion at all of any kind implied or otherwise anywhere in the article that Nissan is even considering switching suppliers. It merely states that having Nissan as the owner of AESC limits the ability of AESC to market to other auto companies because they aren’t independent. Adding Chinese ownership removes that issue and will allow AESC immediate access to the exploding Chinese market because that’s how the rules in China roll.

Interesting interpretation of this news, and thanks!

Yes, this may be about Nissan being able to sell EVs in the large China market, after China changed the rules to limit (or eliminate) competition from foreign battery makers, and not at all about whether or not AESC can compete with LG Chem on making battery cells.

As I mentioned in the thread you just linked to which is about the article you linked to, the article make no such claim about switching to LG Chem The conclusion drawn in the InsideEVs article is based on simple conjecture and is not supported by the facts that are known.

Unfortunately Nissan appears to be outsourcing the cell manufacturing but not the pack design. It’s my understanding (from their prototype battery) that the Gen II Leaf might not have an actively thermal managed pack and that Nissan will continue on with passive cooling.

e-NV200 has air cooling for its 24kWh pack. e-NV200 has no 30kWh option.

the air cooling is only active when it is dc charging

Hopefully, this will bring down the cost of the Nissan Leaf 24kWh replacement batteries by 2018-2019. A battery (excluding labor) replacement price, for under $ 4k, would be a more realistic value proposition for current 2011- 2013 Leaf vehicles and their owners. Batteries that are at, and below their 70% maximum charge threshold, and out of their 60 month / 60k mile factory warranty, could be affordably replaced.

This likely happening, is another question that will have to play out when this transaction and transition is runs its course. Time will tell if this is good for current Leaf owners in need of a replacement.

I’m curious to see if rebuilding an old LEAF battery will become a viable business. I’m afraid the car never achieved high enough volume for that to take off, but I’m sure some people will try it.

When a pack drops below 70% you could probably bring that back up quite a bit by replacing the worst 10% of the cells. If you could do that for $1000 and extend the life of the pack by 5+ years it might be worth it.

It would be a good business case to replace your existing worn out 24 kWh batteries with a brand new denser energy, like 38-40 kWh in the same package with latest BMW and thermal management.
Suddenly, your old Leaf would be an interesting car.

“When a pack drops below 70% you could probably bring that back up quite a bit by replacing the worst 10% of the cells. If you could do that for $1000 and extend the life of the pack by 5+ years it might be worth it.” That would almost certainly be counter-productive. Cells in a li-ion pack have to be carefully balanced; a limitation of li-ion cells which other types of battery cells don’t have. If you replaced the most worn-out ones with new cells, that would put the pack out of balance, which would shorten the life of the pack; probably it would cause the pack to age very quickly. The only way to do this would be to find some cells which happened to exactly match the average cells in the pack. And I doubt that would be worth the effort. Since a li-ion pack’s BMS (Battery Management System) keeps the cells balanced — at least, that’s its purpose — then the ability to extend battery life by replacing a small percentage of cells seems rather limited. Of course, you could identify the dead cells (zero voltage after charging) and the ones which were dying (abnormally low voltage),… Read more »
I don’t think as it is, there’s a viable economic path to the amount of labor necessary to do what you are describing even if you could identify the offending cells. Re-use as home battery units as part of Tesla Wall type installations is probably the best use. No need for fancy re-packaging. Just bolt the sucker to the wall and have applicable controllers. I think eventually, these packs will need to become more modular. Think if they were in groups of cells that were perhaps the size of a regular car battery and software could tell you down to that level which group of cell was failing and you could with only a few tools or none (or at a repair shop) be able to remove and replace that pod. UPS devices (which this basically is) have that concept and have had for a very long time. The casing has plug and play lead/acid battery cells. The control circuitry and all that is separate. On a UPS this action is quite simple. In this scenario it would also be beneficial if your home ‘power wall’ type device was also modular and used the same cell pods. Lots of talk… Read more »

I have no idea what is or isn’t possible by DIYers in this area, but the DIY articles I’ve seen on using salvaged EV battery packs for backup for home solar power installations, all show the engineer/tinkerer tearing down the pack and using individual modules. This means they have to use different BMS systems, either home-made or 3rd party.

I would have expected them to use the packs as-is, as you suggest, and merely tinker with the existing BMS to get it to perform as desired. But none of the articles I’ve seen (admittedly just a few) show the pack being used that way.

And then there is this guy who built an EV pack by salvaging cells from laptops, routers, etc and matching and balancing.

Okay, but that’s just a stunt. It was a stunt used to advertise an important cause, but it was still just a stunt. There is no indication at all of how much life that cobbled-together pack has. For all we know, the pack may be dead after it’s cycled 50 or 100 times.

Once again, we need to take care to differentiate between what is possible in the engineering sense, and what is practical in the economic sense.

Yes, even my hilariously degraded Leaf pack is degrading very uniformly, typically under 30mv between cells. I just want a new pack, and the 4k instead of 6k would be nice. Now around 13.5kwh…..sob

Since its inception, more than 250,000 Leafs have been sold worldwide through December 2016

Fewer than 20k original Honda Insights were ever sold, yet 3rd-party battery pack builders offer replacement Insight battery packs. So with an order of magnitude more Leafs having been sold, there will almost certainly be 3rd-party replacement battery packs available at a considerably lower price than Nissan charges.

The original Honda Insight uses a NiMH battery pack. Makers of 3rd party packs don’t have to worry about balancing the cells, or using a BMS, the way that makers of li-ion packs do.

It’s an apples-to-oranges comparison.

Even at $4000 it won’t be economically viable to replace a pack on an eight year old Leaf. At five years old, a Leaf in good working order is barely worth $8000, and that’s dropping further because higher range cars are becoming more common. Sadly, most 1st gen Leafs will be scrapped at 100k miles or less. If somebody offered an upgrade 50kWh pack that could be swapped in less than a couple hours, that cost $5000, that might be viable, but it’s relatively unlikely.

I don’t think there’s enough volume of the vehicles having been manufactured to justify re-engineering a replacement pack. what’s there been? 250,000 of them built? So if somehow 100,000 wanted/needed replacement that’s not much

Totally agree. It’s just not worth it; used leafs with degraded batteries will just get sold on the secondary market for $4-7k or scrapped. And to be fair, $4-7k is a great deal for a car with 40-50 miles of range if that’s all you need for a commute. When I finally drive my purchased-used-for-a-steal 2013 Leaf into the ground in four more years, I’ll just look for the next super cheap used EV with at least 50 miles of range. And by then the used cheap ones will likely be all in the 80-120 mile range.

Well, you had pretty good deaf for one, but, I drove my last ICE car to 366 000 kilometers before one cylinder left the battle.
It was 14 years old Mazda that was rusted all over, something common here in Canada, but pretty reliable until that day.
It’s just continuity for me to use everything I buy until the very last drop and it is also much more sustainable, environment wise.
I like to fixe thing more than just throwing away, but to be fair, I haven’t done much on the Mazda and since I haven’t done anything on my Leaf, I’m pretty sure this car(not the battery) could last as long.
I like the way it ride, so I would be please just to replace the main flaw of this car.
5 k$ to have a 150 miles range car working fine would be quite a deal for me.

It’s not obvious that driving that car into the ground was best environmental​y speaking. A vast majority of the lifetime environmental​ impact from a car occurs during operation. ICE vehicles also emit much more when they are old vs new.

You’re absolutely right. This makes no economic sense, even as a cottage industry. We might see some DIYers doing that, and likely most of those will be disappointed at the results. But it’s unlikely anyone could make a profit doing that, because the cost would be so high, and the remaining lifespan of the car so limited, that it would make far more sense to simply buy a new car, or a newer used car.

Those cars get exported into poorer countries that have much smaller labor costs. Just like now they buy 3 write-off cars that get turned into 2 cars that work to a degree.

At the very least those guys are going to open 3 degraded Leaf battery packs and turn them into 2 fairly usable ones.

With the battery prices decling fast what makes you think it isn’t even more viable in the future with new cells or cell packs?

Anyone who has the technical expertise to properly refresh a re-used battery pack in the method you suggest could earn far more money doing something which would actually turn a profit.

The amount of labor going into that would be intense, and due to the difficulty it has to be highly skilled labor. I suppose one could set up a small production line where unskilled workers could use pre-set testing equipment and pre-set numbers to sort thru used battery cells by rote, but that would need a certain amount of demand for the product; a product for which there simply won’t be sufficient demand to justify such a production line. Even in third-world countries, they understand that paying a lot to get something that’s mostly worn out is not a wise way to spend money.

Yeah this taking 3 bad used Leaf batteries and rebuilding into 2 good used Leaf batteries is likely more viable than my initial comments. You don’t need to replace the worst 10%, you just need to replace the cells that have gone bad. Replacing them with similarly used good cells would be the way to go.

This has been an ongoing enterprise for some shops with Prius packs, but Prii sold in a lot higher volume than the Leaf, so I don’t expect it to become nearly so common. I wouldn’t be surprised to see a shop or two pop up in Leaf-dense major cities like Atlanta, LA, etc … that do this.

A quick google search found at least one place offering rebuilt Leaf batteries.

Interesting, but most of the text on their website refers to “hybrid batteries”, by which they mean NiMH batteries.

It would be interesting to hear from an actual customer who bought a li-ion pack (for the Leaf or otherwise) from this company, to see if they were satisfied with what they got… or not.

Hmm. Seems like there was speculation that LG would just move into the US Nissan battery factory with LG manufacturing equipment and make Leaf batteries for Nissan but this article doesn’t seem to support that. Kind of odd that the Chinese company would move into Nissans US battery plant and make batteries for other auto makers.

At last. I was ridiculous to have 2 battery manufacturers within the Renault-Nissan alliance

Great move. Battery manufacturing will be dominated by the Chinese, with the Koreans coming in a distant second. Don’t make your own tires, don’t forge your own steel, and don’t make your own batteries.

*unless you’re Panasonic or LG.

If we don’t blow up due to shoddy Chinese Batteries.

Nissan is disappointing; They had a lead on the other car companies and now are falling back to an ‘also ran status’…I think because their management suffered from having to keep their stock numbers up by marketing ICEVs.

I remember many people touting Nissan over GM, because they were making their own batteries. Even though Nissan was having a lot of battery issues at the time. Meanwhile GM built the largest lab in the US and tested all of the chemistries from various suppliers, finally settling on LG Chem. Fast forward to today, and most other car makers have followed GM’s lead, buying cells from LG.

Though keep in mind the cells that GM buy from LG Chem have a chemistry that is owned by GM. LG Chem simply manufactures them to GM’s specifications. Obviously there was some design collaboration as the cells need to stay within LG’s manufacturing capabilities.

So a battery cell in a Bolt EV will be different than one used in a Gen II Leaf even if they are both manufactured by LG Chem.

Is that true? I can’t find any links talking about this.

Do you have one?

No, I don’t think that’s true.

It is true that GM did extensive testing of cells from different manufacturers before deciding on suppliers, but I don’t believe they provided the cell chemistry and design.

Yes see the recent link below from Mark Reuss.

quote” euss also said as GM increases production of electric vehicles, particularly in China where GM has plans to introduce 10 different electric vehicles by 2020, the price of battery cells will be driven down. “We own our own battery chemistry. We integrate the pack and we have our own electric motors. We own all that design.”

I think it’s far too soon to pronounce as dead the idea that auto makers are better off depending on an outside supplier for batteries, rather than building their own factories so they can control their supply. As Tom suggested above, this may be nothing more than Nissan moving to circumvent China’s new restrictions on sales of EVs in China using foreign made batteries. It’s certainly true that there was a surprisingly public debate within Nissan over whether to continue making their own battery cells, or to switch to LG Chem. The last we heard, they were doing some of both; continuing to run their battery factories at limited capacity while also buying some cells from LG Chem. One thing is very clear indeed: No auto maker other than Tesla and BYD are going to be able to quickly ramp up production of long-range PEVs (Plug-in EVs) over the next couple of years, if not longer. LG Chem is already the sole supplier for the Chevy Bolt EV. If Nissan switches entirely to LG Chem’s batteries for the next-generation Leaf, that will leave even fewer kWh of li-ion batteries for LG Chem’s other customers. The more slices you divide the… Read more »

Automakers don’t make a lot (most) of their components. I don’t see batteries as being anything different. As EV’s start to get out of the 1% market share, you will see more players, and investment.

Kdawg, just consider the purpose of Ford’s River Rouge industrial complex, used to build Model T’s starting with raw or only semi-processed materials. Someone even claimed, in a recent InsideEVs comment, that Ford had its own rubber tree plantation to provide latex for tire rubber. That complex was mostly abandoned later, as the industry for automotive parts suppliers grew. But at the time, when automobile mass production was in its infancy, that was the best way for Ford to grow its production rapidly. Tesla is in a similar situation today regarding battery supply. Relying on Panasonic to ramp up its production to supply Tesla’s need for battery cells simply has not worked. Tesla has been almost constantly hampered by limited battery supply. That’s the primary purpose of Tesla spending billions of dollars to build a Gigafactory. Not primarily to reduce costs, but to allow Tesla to control its own supply. If Nissan sells off not only its Japanese battery factory, but also its Tennessee and UK factories, then it will be abandoning any ability to regain its former position as market leader in the EV revolution. It may make sense for GM to continue to rely on LG Chem for… Read more »

You can’t really compare Ford’s actions during the early stages of the Industrial Revolution to 2017. Remember, back then it wasn’t just automobile manufacturing that was in its infancy; it was the entire concept of assembly-line production.

Battery production is not a new technology. If Apple didn’t need to open its own touchscreen manufacturing plant for the iPhone, car companies don’t need to open their own battery production plants for cars.

The idea that there is a huge wave of EV buyers Just Around The Corner that will immediately cause huge battery shortages (for years?) is a fantasy. The market will grow, and the rate will increase, but not in a way that causes any sort of crazy shortage.

The obvious retort is “But what about the Model 3 reservations?” Even IF Tesla is able to make as many M3s as they plan, and IF the Model 3 reservations all immediately convert to sales… that doesn’t affect anyone else’s battery output at all. So there is no reason whatsoever for any (non-Tesla?) company to believe that existing & planned battery manufacturing capability will not meet their future sales needs.

Spider-Dan said:

“You can’t really compare Ford’s actions during the early stages of the Industrial Revolution to 2017. Remember, back then it wasn’t just automobile manufacturing that was in its infancy; it was the entire concept of assembly-line production.”

I agree that Tesla in 2017 isn’t at all in the same situation as Ford was in 1908. Tesla has to compete with an established and already highly competitive new car market. And unlike the Model T vs the horse-and-buggy, the average person does not see such a clear-cut superiority of BEVs (or plug-in EVs in general) vs. gasmobiles. We dedicated EV fans do, but the average person doesn’t… yet.

On the other hand, Spider-Dan, do you not realize that re-creating Ford’s success is exactly what Elon Musk is aiming for? His idea of speeding up the production line by 5x or 10x, by eliminating human assembly lines workers entirely and letting the machines move as fast as practical, appears (at least to me) to be Elon’s attempt to re-create the revolutionary advance of Henry Ford’s invention of the high-speed mass production line.

While Elon may be trying to increase automation, that really has nothing to do with whether or not automakers should produce their own batteries.

You cited the early Ford years as an example of why vertical integration is desirable (if not necessary), but the reason why it was so at the time was because of the lack of industrialization for the supporting materials. The battery industry in 2017 is already fully industrialized, so that comparison doesn’t seem to hold.

In other words, there really isn’t any doubt that third-party battery suppliers are capable of ramping up their supply. Will it be instant? No, but all available evidence suggests that there is no reason to believe that will be any enormous spike in (non-Tesla?) EV sales that would require a huge change in battery orders.

And Ford found that a fully integrated solution limited flexibility and increased cost and they moved away from that model.

Ford moved away from the “extreme vertical integration” model of the Ford River Rouge complex, yes… but only after Ford had created the large market for automobiles that auto parts suppliers grew up to supply!

Tesla and BYD are in a similar position today. Sure, it’s reasonable to believe that as the market for PEVs (Plug-in EVs) grows, the worldwide supply of li-ion batteries suitable for use in PEVs will also grow. But those who want to race ahead of the pack, and get as much of the emerging market as they can while the getting is good, will have to do exactly what Ford did, to this extent: They’ll have to build out their own factories to supply battery cells. That’s the main reason Tesla and BYD are doing that. Not to reduce costs, but to allow them to quickly expand their production beyond the limited availability of commodity li-ion battery cells.

If Nissan is moving away from that position, moving away from being able to control their own supply of battery cells, then as a consequence, Nissan is abandoning its ability to ramp up production and grab a big slice of that emerging market, as Tesla and BYD are doing.

LG is not building factories on the scale of Tesla because they do not have a commitment for batteries on the scale of Tesla.

GM committed to build, what, 30,000 Bolts in the first year, possibly up to 50 or 60,000? That’s a far cry from Tesla committing to try to ramp up to 5,000 Model 3s per week by the end of the year!

LG is rapidly expanding, and if GM or other automakers give LG a believable commitment that Tesla gave Panasonic, then LG will invest on that scale.

If buyers give GM and other EV makers a solid sales figure, I am sure GM would have given LG a much bigger contract…

BenG said: “LG is not building factories on the scale of Tesla because they do not have a commitment for batteries on the scale of Tesla.” Yes, but that’s understating the case. Tesla could not get Panasonic to ramp up battery cell production as fast as Tesla needed them to, despite Tesla’s clear commitment to buy those batteries. I presume that’s because Panasonic thought — probably correctly — that it was a risky investment. If Tesla had folded, or found another supplier, then Panasonic would have been stuck with some large factories that had no customers. In fact, exactly that happened just a few years earlier; li-ion battery oversupply is the main reason Envia went out of business and A123 nearly did the same. I find it quite understandable that Panasonic didn’t want to repeat that mistake. Tesla is willing to “bet the farm” on a very large battery factory, because it has to, if it wants to follow its business plan of rapid growth. Tesla has to build Gigafactory 1 for the same reason Ford had to build the River Rouge industrial complex. Panasonic doesn’t have to. Tesla has no choice; either it grows much more slowly than it… Read more »

“As for Nissan’s actual battery facilities in the US and UK, those are apparently on the table for sale as well according to the Nikkei Asia Review.”

Isn’t the Smyrna battery plant right next to Nissans auto assembly line?

So someone buys the facility at Smyrna and start making batteries for other auto manufacturers?

It doesn’t make sense.

Tesla could snap those factories up and, Viola! Gigafactories 3 and 4. Done. Elon got NUMMI for a song. Let’s see if he can do it again.

I wouldn’t call them giga-factories. Mega-factories, maybe. 🙂

Certainly the shipping costs and time will be significantly greater for sales to other PEV makers. I would guess whether or not it makes sense would depend on how good the access is to cheap transportation, with water transport via river and ocean being by far the cheapest, and rail transport the second cheapest.

The website linked below does suggest that river traffic by barge from Nashville (near Smyrna) to the Mississippi river is possible year-round, so perhaps this isn’t as bad a location as it seems?

I think some people are reading this article thinking that Nissan is outsourcing everything battery. I don’t think this is the case. I think they are mostly outsourcing battery cell manufacturing. I would presume Nissan would continue to retain battery pack design and possibly even some battery pack assembly.

Nero from the article,
“We assume some component of the battery supply chain would still produced by AESC ”

But they don’t need a huge plant like Smyrna to do that. Clearly there is a piece of the puzzle missing

My 2016 Leaf SV lost 2 bars at around 19,600 miles.

That really sucks.
So what does that leave you with realistic miles-per-charge compared to new?

New 110 miles now 78-89 miles depending on a/c use and if eco is used. I think Nissan didn’t do much to modify battery chemistry (lizard battery) I think it was all BS. The only good thing is that it’s a lease.

2012 43k miles I lost 2 bars

Where are you located? I’m in central Florida where we are having brutally hot temperatures most of the year. This past winter was very warm .

Yikes, that’s brutal battery degradation … I hadn’t heard of a lizard battery going down that quickly.

If you read this article from the standpoint of NEC it makes a lot more sense. This move gives NEC access to the growing and heavily EV incentivized chinese market with an appropriate partner they are obliged to get anyway. Chances are they still will be making batteries​ for Nissan for some time.

Yup. Setting your hair on fire by thinking this means “OMG! Nissan is abandoning its own battery cell factories!” …may be premature. Let’s wait and see if Nissan also sells off its Tennessee and UK battery cell factories.

If LG can’t produce enough cells to cover the demand from the Bolt how are they going to provide Nissan with enough cells?

It’s not really that they can’t. The issue with 3rd party sourcing of batteries is in the product planning of the OEM. Specifically, the time-gap it takes that 3rd party company to prioritize your need, and bring on new capacity to adapt to your mismanagement. ie) If GM signs a deal with LG Chem to produce 30,000 packs/2,500 per month, then LG is going to supply 30,000 packs. At the same time, if Nissan says they need 90,000 packs/7,500 per month, then LG is going to supply 90,000 packs. Now if GM (or Nissan) under-estimates demand…say, in Europe (because perhaps they don’t want to get “stuck” will excess packs), they will have an issue if LG Chem has fully optimized their plant productivity at ~120,000 packs and has no spare capacity. LG is going to fill GM’s original 30k order. However, any subsequent and unexpected demand that results in the need for additional packs over and above the current contract will only be filled as LG is available to do so…outside of the other already planned capacity. (sidenote: I’m not saying that is necessarily the case with GM atm – it may just be “rollout blues” for those early hand-raisers… Read more »

The question is, how long does it take to place new orders?

If the Bolt turns out to be a runaway hit in Idaho, GM can place more more orders for batteries. Now, will they arrive in a month? No, but it’s going to take time for GM to arrange for increased production of the other components as well.

So the real question is: how much will add’l battery production delay the production of add’l cars, after all other components are ready? If the answer to that question is measured in weeks or months and not quarters or years, what are we really talking about?

That would be the million dollar question, but reasonably speaking you are talking at least 6 month (at best) or past that into the next-model year-cycle to bring on an extra, previously unplanned production.

As a case in point, Nissan got caught flat-footed early its model life with just the one facility out of Japan, and in took them ~11 months to rectify it (and that was a self-controlled plant, only concerned with the 1 model).

Battery production and the lead time to bring on additional capacity is actually a fairly calendar-intensive process. It is by far, the hardest component to source in a timely fashion if you have made a forecast error and find yourself running short.

I don’t disagree, but when we’ve had instance after instance of demand underperforming expectations, it seems to me that it’s worth waiting for the first-ever instance of EV demand wildly (and sustainably) outpacing supply before going crazy with battery orders.

Fully agree.

It is the repeated underperformance of demand vs expectations (that one could say was self-inflicted by the OEMs given their choices of auto segments to electrify and how well they did that) that has allowed LG Chem, Samsung and Panasonic to become the defacto “goto” places to source batteries…as they are finding volume through mass OEM and 3rd party/storage distribution.

The result of OEMs over-managing/pigeon-holing their EV offerings so as to not “product creep” into high value ICE offerings, has been that the 3rd party players now have huge scale advantages over what any single OEM could hope to accomplish by selling 20-50k plug-ins in (mostly) low margin/2nd class segments.

I think their choice of market segments was the appropriate one to make.

Who would want to buy a $50,000 PHEV pickup with range in the teens and fairly unimpressive performance while on gas? Or a BEV SUV with <40 miles of range from the factory?

In the early generations, range and price are the most important limiting factors, and compact econoboxes are the best way to maximize value in both of those areas.

Spider-Dan said:

“In the early generations, range and price are the most important limiting factors, and compact econoboxes are the best way to maximize value in both of those areas.”

But not with plug-in EVs. The failure of CODA, and the multiple bankruptcies of multiple attempts to produce and sell the Th!nk City, are good examples of why you can’t enter the plug-in EV market at the bottom. PEVs are just too darn expensive to compete with gasmobiles in the lower price segments of the market. Tesla has achieved success at entering the market at the top, and so far it’s the only new American car company to do so, within the last half-century.

Other new auto makers may achieve success by following Tesla’s lead. They are not going to achieve success by following CODA or Th!nk, at least not until per-kWh battery prices come down quite a bit more.

Citing Tesla as a blueprint requires that one ignore the Fisker Karma, the BMW i8, and the Porsche 918… none of which has sales approaching the Model S.

Spider-Dan said: “The question is, how long does it take to place new orders?” Previous reports were that LG Chem was taking orders for its batteries 2 years in advance. And the rule of thumb is that it takes about 2 years to build a factory and fine-tune it for high volume production. Coincidence? Not to suggest anything Jay Cole said isn’t perfectly true; certainly he knows more than I do. But I suggest those two facts may be causally linked. What we don’t know — or at least, I don’t, maybe Jay does — is what the upper limit was in the contract between LG Chem and GM. As Jay said, LG will supply as many batteries as was contracted for. But how much flexibility did GM put into that delivery contract? GM said it was planning on building only about 30,000 Bolt EVs; as I recall, a LG spokesman said “a bit over 30k” or something like that. EV fans got all excited when some GM spokesman said (paraphrasing here) ~”We can ramp up to 50k Bolt EVs per year, to meet demand.”~ But just because GM has the production capacity in its auto assembly plants to do… Read more »

Automotive contracts don’t work that way. Typically there will be a minimum anticipated volume which for GM might be 30K batteries per year. But typically there are terms terms and expectations for increased demand and production (and even lead times around those expectations).

Buying batteries is not at all a typical automotive contract, it isn’t at all like knocking an extra 10,000 widgets off a line where all you need to do is dip into some overtime shifts if need be – and there is 20 different low cost suppliers all around the same pricing fighting for your business. There are extended lead times and shelf life considerations for new/100% capacity batteries.

There is no battery supplier that will let a company make a set order, then guarantee 2X expansion of that order over the short term/”just in time” model if that OEM finds unexpected demand. Especially not LG Chem, who is first to market with inexpensive/2nd gen batteries and currently has ~21 different OEM contracts. They would of course say they will do their best to oblige as best they can, but that would be it…there is no leverage.

They will ramp up. These things take time. Just because a company couldn’t make enough cells at one point doesn’t mean they can’t do so later. It’s not only Tesla that can built more factories.

Yes, but you do actually have to build a factory and fine-tune it for volume production, before you can start shipping batteries. It’s not like LG Chem or any other battery maker can hide a large-scale construction project, nor hide the hiring of hundreds or thousands of workers to man that new factory.

It takes about two years to build a new factory and fine-tune it for volume production. That will give us plenty of time to see new battery production coming. Bottom line: Tesla/Panasonic is building out new battery production capacity very rapidly. By comparison, LG Chem simply isn’t. The only company to rival the pace of Tesla/ Panasonic’s increase in output, is BYD.

The article linked below is 10 months old, but still pretty relevant to the question: