Ford, GM launch expansion plans as Biden charges up battery strategy

China 2905 Cons. Discr. - Autos 1117 Energy - Renewables 165 Info Tech - Tech Hardware 737 Japan 572 South Korea 550 U.S. 5211

The Biden administration’s 100 day review of critical supply chains has yielded detailed policy recommendations across four major sectors including large capacity batteries, key minerals, semiconductors and pharmaceutical ingredients. 

In the case of large capacity batteries the review is coming just as the autos industry goes through a one-in-a-generation restructuring of supply chains with the shift to electric vehicles. The relative simplicity of supply chains versus combustion drive trains and importance of batteries within the product from a scale and expense perspective makes capturing battery manufacturing both an employment and security of supply issue.

Indeed, the Department of Energy in the review has stated that there are “benefits from co-location (e.g., cost and flexibility benefits from placing battery pack and cell manufacturing near EV demand)“.

That comes as Ford and General Motors have both announced their long-term investment plans to increase electric vehicle manufacturing. The “Ford+” plan will involve investments of at least $30 billion in electrification in the period to 2025 including shifting half the production of its Lincoln brand to electric drive trains over that period. 

General Motors meanwhile plans spending $35 billion in the 2020 to 2025 period with an annual global EV sales target of one million by 2025. Both will likely be looking to secure incentives from the Biden administration’s plans.

The DoE has made 26 recommendations in four broad categories that include incentives “needed to incentivize every stage of the U.S. battery supply chain including boosting demand for products like EVs and stationary storage that use high-capacity batteries” suggesting demand as well as supply side measures are needed. 

On the demand side there are recommendations to electrify the federal fleet of vehicles, offer commercial rebates, roll out charging infrastructure and promote utility-scale use of battery storage to support renewables.

The supply side is more complex. Battery production will largely depend on private capital investment, with proposals to provide federal grants as well as renew manufacturing tax credits  The policies will require coordination with lithium, nickel and cobalt strategies covered in key minerals review as discussed in Panjiva’s research of June 15. Those are complicated by incorporating investment in mines in allied countries and emerging markets which may also want to foster their own battery and electric vehicle businesses.

The peril from U.S. automotive supply chains’ reliance on overseas battery supplies can be seen in the recent acceleration in U.S. imports of large capacity batteries. Panjiva’s data shows U.S. imports of lithium ion batteries for automotive applications climbed 128% year over year in the three months to April 30. That was largely down to a surge in shipments from China, a strategic adversary as defined in the administration’s supply chain review, while imports from Japan fell and those from South Korea rose by 71.7%.

There’s been significant volatility however, with imports in the past three months down sequentially (three months to April 30 versus three months to Jan. 31) by 36.8% including a 32.9% drop in shipments from China and an 81.8% drop in shipments from South Korea. Supplies also have been complicated by the, now settled, intellectual property lawsuit between LG Chem and SK Innovation. 

China has come to dominate U.S. large battery imports

Chart segments U.S. imports of large capacity batteries by origin on a monthly and three-month average basis. Source: Panjiva

The settlement has allowed SK Innovation to launch its battery joint venture with Ford to enable the delivery of development plans flagged above. Despite that, there’s been a marked decline in U.S. seaborne imports of batteries linked to SK Innovation with a 54.0% drop in the three months to May 31 versus the three months to Feb. 28 even though shipments are still 6.3x higher than a year earlier and 166% above those in the three months to May 31, 2019.

Shipments linked to LG Chem meanwhile have been in a longer-term decline with a 13.3% sequential drop and a 62.2% slide versus a year earlier. It remains to be seen whether the settlement with SK Innovation will result in a renewed surge in shipments.

The largest importer however remains Tesla, with growth of 47.5% sequentially and by 170.2% year over year as the firm continues to expand shipments of the mass-market Model 3 and Model Y vehicles.

Tesla ramps up battery imports as model range expands

Chart segments U.S. seaborne imports of lithium ion batteries by consignee on a monthly and three-month average basis. Source: Panjiva

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