There’s an underlying hypocrisy in America’s quest to develop low-cost electric cars. On one side, there’s China-phobia. Plenty is being done on the policy side to protect the century-old homegrown car industry from a potential influx of cheap Chinese EVs. On the other side, automakers have realized that without the expertise of Chinese battery giants, they can’t really solve the affordability equation. Ford’s partnership with CATL is a screaming example of this contradiction.
That kicks off the thank-god-its-Friday edition of Critical Materials, your daily digest of top news and events shaping the world of electric cars.
Also included in today’s round-up: how uneven growth in EV sales, high inventories and weak profits in the U.S. negatively impact global automakers and how Hyundai Motor Group is crushing it in the U.S.
30%: Betting On CATL Was Pivotal For Ford
Most U.S. automakers are seeking help from Chinese battery makers. That includes Ford, which has partnered with Contemporary Amperex Technology Limited, or CATL, the world’s largest battery maker headquartered in Ningde, China.
The result of that partnership—plus stringent local sourcing requirements under the revised Inflation Reduction Act (IRA) guidelines—is a $2.2 billion battery plant under construction in Michigan.
In Ford’s second quarter earnings call this week, CEO Jim Farley admitted that the CATL partnership was central to Ford developing low-cost models for American buyers, thereby fending off the potential threat of cheap Chinese EVs entering the U.S.
China and Tesla are the cost benchmarks for Ford, Farley said. And licensing CATL’s lithium-iron phosphate (LFP) batteries would help it reach that goal.
Here’s what Farley said during the earnings call:
It was a very important bet for our company to localize LFP cells in North America. We're two years into that project. CATL is the largest battery maker in the world, and they lead iron phosphate cost and reliability. That is a signature partnership that we've been working hard on, and Marshall is on track.
Look what Volkswagen is doing with XPeng, and many others who are kind of taking a Chinese low-cost platform and using that. That's not our strategy. Our partnership strategy will be on the component side, going deep into the supply chain for IP that is critical and unique.
What we found in subsequent trips to China is that we have a very competitive battery with CATL, but many of the Chinese players in the lower-cost have very affordable batteries, but they don't have the most efficient design outside of the battery on the other EV components.
And our team, the Skunkworks team, we might as well call it a big team now because it's no longer Skunkworks, we're betting on them as our affordable platform. They have really designed breakthrough EV components with our own design that we think are better and cheaper. And we have a very competitive battery localized with the IRA benefit.
CATL is the crème de la crème of battery companies. We often report on insane innovations from that company. Like an LFP battery that can add 370 miles of range in 10 minutes, or batteries that can last 1.2 million miles or 16 years.
Some of this cutting-edge technology may not be commercialized yet, but there is a real possibility it will be in the future. If Ford sustains this partnership through the decade, its rapidly growing number of EV customers could benefit from this technology, potentially making range anxiety a thing of the past. A win-win for all.
60%: U.S. EV Market Causes Trouble For Global Automakers
In a deeply polarized America, the transition to electric cars has proven far more complicated than once thought. EV sales are growing rapidly for several automakers, but they’re still uneven given Tesla’s decline. Then there was a dealer software outage that impacted the whole country while automakers were still dealing with high inventory.
This has global implications.
Here’s what Reuters reported this morning:
Global automakers are facing a weakening outlook for sales across major markets such as the U.S., while also juggling an expensive transition to electric vehicles and growing competition from cheaper Chinese rivals.
U.S. automaker Ford plunged 16% after its second-quarter profit missed analyst expectations, weighed down by high warranty costs and a cash-burning electric vehicle business.
Shares in Milan-listed Stellantis lost nearly 9% after earlier hitting their lowest in almost a year. Nissan dropped 7%, sending the stock of its French alliance partner Renault down as well despite posting a first-half profit that beat estimates.
Automakers were dragged down by excess inventory in the United States, in part due to a June software outage that slowed or halted some dealerships' operations. New-vehicle supply at the start of July was more than double the year-ago period, according to Cox Automotive.
After a century of selling polluting, planet-warming gas cars, the shift to zero-emissions battery-powered vehicles was never going to be easy. As this transition unfolds, there will be winners and losers. Nokia lost its edge when Apple launched the iPhone and cable TV has faced the onslaught of streaming platforms. Technology evolves far faster than many of us can comprehend.
But if that is what it takes to prevent increasingly common climate disasters and avoid breaking more hottest-day-ever records, then so be it.
90%: Hyundai Motor Group Is Crushing It
While Ford, Stellantis and Nissan are struggling to turn profits, Hyundai Motor Group is having its moment, in the U.S. at least. Its global wholesale car sales fell 0.2% in the second quarter, but North American sales increased 15% and overall earnings were strong.
Here’s an excerpt from the Wall Street Journal:
Strong demand for hybrid electric vehicles and sport-utility vehicles drove brisk sales in the U.S. despite a slowdown in demand for pure electric cars, it said. The U.S. dollar’s strength against the won also helped boost earnings.
Hyundai Motor said it expects demand for hybrid cars to remain strong in the near term, adding that pure EVs will lead the market for environmentally friendly vehicles in the long term.
I'm a fan of Korean models. About a decade ago, Hyundai began improving its gas cars, transforming from a maker of mundane family vehicles to one that produces aspirational models that don’t break your bank.
I could have never imagined that the maker of the i10 hatchback would develop something as bonkers as the Ioniq 5 N that can simulate manual gear shifts.
High inventory levels have made the company's EVs even more attractive. Models like the Ioniq 5, Ioniq 6, and the Kia EV6 and EV9 are currently deeply discounted. Several trims offer a range of over 300 miles, making them excellent value for money.
However, competition is heating up. Tesla, Ford and GM are all racing to launch their next-generation affordable models, which could overshadow Hyundai's moment in a jiffy. I hope Hyundai is preparing for that.
100%: What Battery Tech Is The Most Promising?
The traditional nickel-manganese-cobalt (NCM) chemistry is ubiquitous at the moment. Most Teslas and other long range models use NCM batteries from the likes of LG Chem, Panasonic and others thanks to its high energy density.
NCM might be here to stay, but research is underway in full steam for cheaper, more durable and faster charging alternatives. LFP is one example that’s now getting increasingly commercialized. Do you think solid-state batteries or those that use silicon anodes would become the next big thing in battery tech? Or is there another battery-type out there with some hidden potential? Leave your thoughts in the comments.
Contact the author: suvrat.kothari@insideevs.com
