GM, VW Build Up Battery Supply Chains Amid EV Push

"Auto makers are trying to control more of the supply chain for electric vehicles, forging new partnerships with raw materials producers and investing in facilities that make chemicals for batteries.

General Motors Co., Volkswagen AG and other major car companies have been spending heavily on joint-venture factories to ensure their supplies of electric-vehicle batteries. Now, they are looking to expand further as they seek to lower costs, secure sought-after components and exert more control over battery quality and performance.

Tesla Inc. was among the first to insource more of its EV-battery making, moves that helped the electric-vehicle pioneer become the world's most valuable auto maker. The push by auto makers to control more of their supply chains comes as a semiconductor shortage hampered vehicle production.

In recent weeks, Volkswagen and Stellantis NV announced deals to lock up supplies of lithium, the metal whose electrochemical properties make it ideal for electric vehicles' powerful batteries.

GM said in early December that it will invest in a new North American factory with Korean steel and chemical maker POSCO to produce cathode materials, a critical component of the battery that accounts for a big chunk of its cost.

Volkswagen has plans to build a similar cathode-material factory with Belgian materials company Umicore SA.

The moves point to an industry that is again embracing elements of vertical integration, a strategy that traces its roots to the early days of the auto industry when some manufacturers owned or acquired much of the supply chain necessary for production. Ford Motor Co. at one point owned mines and a steel mill.

The electrification of vehicles threatens to disrupt the industry's normal hierarchy between auto makers and their suppliers, analysts say.

Traditionally, auto makers have been able to improve profitability by pitting suppliers against one another. With just a handful of players making the highest-quality batteries and chemicals, auto makers have diminished pricing power.

Relying solely on suppliers to develop their battery technology would be akin to not making their own engines, said Thomas Schmall, a VW board member and chief executive of the company's parts business, last year." [1] 

1. GM, VW Build Up Battery Supply Chains Amid EV Push
Foldy, Ben. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 04 Jan 2022: B.4.