GM, Ford Intensify Automakers’ Rush To Make Batteries For EVs

CEOs are committing to proprietary development and manufacture after difficult “make-or-buy” decisions.

Early conceptual rendering of Ultium Cells LLC battery cell manufacturing facility in Spring Hill, Tennessee.

Right now the global auto industry is scrambling to find and repurpose enough semiconductor chips so vehicle production doesn’t have to be curtailed much longer than it already has been, as shortages have crimped output in the United States and elsewhere.

But automaker CEOs already are looking toward a future availability crisis and trying to ensure their companies will have enough of the next crucial commodity: batteries to power electric vehicles. Ford CEO Jim Farley this week became just the latest to lay down a corporate strategy.

These decisions are an important example of make-or-buy determinations that CEOs across manufacturing are having to make these days in the wake of the disruptions caused by Covid, pressures to decouple from Chinese sourcing, incentives to “buy American,” and hesitation to commit to new factory capacity at a time of unprecedented scarcity of labor.

As with the automaking chiefs, against this backdrop many manufacturing CEOs are closely examining their supply chains, especially for key components that can make or break their companies’ ability to participate in booms and withstand downturns.

Car-company CEOs are in the thick of such strategizing right now. Farley, General Motors CEO Mary Barra, and Volkswagen CEO Herbert Diess are following in the footsteps of industry iconoclast Elon Musk of Tesla and attempting to build their own supply chains, making their own batteries using proprietary technology. Above all, they want to make sure their companies never get caught in the kind of ransomed positions they find themselves in these days with chip supplies.

Ford illustrated the currency of make-or-buy decision by flipping positions on the battery issue just this week. The company said it plans to open a $185-million battery-development center in southeast Michigan next year and eventually plans to make its own battery cells for a wide range of electric vehicles, including plug-in hybrids as well as all-electric models. The company has rapidly transformed its position on proprietary manufacturing of batteries in the few months since Farley succeeded Jim Hackett as CEO. Last fall, Hackett said that the battery supply chain “has ramped up since Elon [Musk] built his gigafactory, and so there’s plenty [of capacity] there that does not warrant us to migrate our capital into owning our own factory. There’s no advantage in the ownership in terms of cost or sourcing.”

Farley’s move followed Barra’s recent commitment to build a second battery-cell plant, in Spring Hill, Tennessee, to support the transformation of GM’s vehicle portfolio with battery-electrics in the next 15 years. The company’s joint venture with LG Chem, Ultium Cells LLC, plans to spend $2.3 billion to build the plant on land leased from GM, creating 1,300 new jobs and supplying GM-designed batteries to the BEVs the company plans to make at its adjoining assembly plant.

Volkswagen recently said it would invest in six battery factories in Europe alone, including expansion of an existing partnership with Northvolt AB of Sweden.

Most EV batteries at this point are made by Asian suppliers, and Chinese automakers are using their early adoption of EVs to catapult their industry into a global technical lead over western competitors that mostly have relied on gasoline-powered engines to achieve their positions in the worldwide automotive derby.

But with some predictions that electric vehicles will consist of as much one-fifth of U.S. auto sales, for instance, within a decade – requiring about eight times more batteries as factories currently can produce – governments as well as automakers are trying to ensure they don’t get caught flat-footed in their battery supply chains as they have been lately in depending for chips on a handful of plants in Asia.

Right now, GM is winding down assembly of gas-powered utility vehicles and engines at its existing facilities in Spring Hill to make way for a $2-billion retooling and expansion to convert the former home of Saturn to making Cadillac’s Lyriq EV. The new Spring Hill battery plant will be similar in size and scope to the first one GM announced, currently under construction in Lordstown, Ohio. GM’s assembly plant in Hamtramck, Michigan, will become a prime EV-making site as well, and its plant in Orion Township, Michigan, already makes small Chevrolet EVs.

With its plan for Spring Hill, GM is continuing to flesh out its stunning commitment, made by Barra a few months ago, to complete a transition of its retail vehicle fleet to all BEVs by 2035. Recently GM’s marketing head, Stephen Carlisles, backed the company away just a bit from an ironclad adherence to that deadline, saying GM won’t eliminate gasoline-powered models that still may be in demand at that time.

At this point, while GM’s BEVs aren’t anything special, the optics of its 2035 commitment already are impressive. Its commitment to two plants to make Ultium batteries follows the expansion of GM’s battery-development center in Warren, Michigan, one of the most significant facilities in the world dedicated to improving battery configuration, efficiency, flexibility, life and durability.

Arguably, automakers are betting a bit on the come on the eventual popularity of all-electric vehicles. At this point, BEVs have captured only a few percent of the U.S. auto market. But everyone from the federal government to the news media to progressive politicians to a growing number of industry leaders are both pushing and betting on the idea that they can get the mainstream of American consumers to embrace electric vehicles pretty quickly.