(Retelling a story published on Wednesday; no text change)
SEOUL / BEIJING / FRANKFURT, March 17 (Reuters) – Days before Volkswagen AG held an event to announce a major ramp in electric vehicle production, a German carmaker suddenly told South Korean battery suppliers that their current technology would be largely ruled out. from these plans.
The decision by the world’s second-largest automaker to move most of its cars to a different battery cell in two years came as a surprise to LG Energy Solution and SK Innovation, three people said. knowledge of the situation to Reuters.
“Our daily practice is not to get such a one-sided message from a partner … people seemed to be very scared,” said one of the sources.
Volkswagen’s move to a new integrated prismatic battery, away from the pouch style manufactured by LG and SK, is likely to be a major blow as the pair has invested billions in pouch production sites in the United States, Europe and in Asia.
The move also raised concerns among battery suppliers that the race with manufacturers to meet growing demand for EVs in a rapidly changing technological environment could leave them late almost overnight.
“Volkswagen’s announcement is just the beginning of the competition in the EV market, indicating a major future investment in competitiveness,” said Lee Jae-il, an analyst at Eugene Investment & Securities.
Volkswagen is under a lot of pressure to cut battery costs, strengthen its position in China, and better compete with Tesla Inc. Contemporary Amperex Technology Co. Ltd (CATL) of China Inc., which already supplies Volkswagen and Tesla, makes prismatic batteries, the preferred technology of Volkswagen vehicles in the future.
Thomas Schmall, Volkswagen’s board member in charge of technology, said this week that the company would maintain its current contracts, adding that after 2025 the next generation would be EV cars using prismatic batteries. Schmall did not specify battery technology for the remaining 20%.
Schmall said it would not be a big deal for battery suppliers to switch to prismatic cell production, although analysts suggested they needed major reinvestment and time to regenerate factories.
SK, which had announced a contract in 2018 to supply pouks batteries to Volkswagen but had not started doing so, said it has no current plans to produce prismatic batteries. It supplies pouch batteries to Hyundai Motor and its flagship company Kia.
LG, which makes prismatic batteries except for smaller products such as laptops, declined to consider whether it would extend that production to EV batteries. Volkswagen was one of its biggest messengers for pouch batteries, but it retains Tesla, General Motors and Hyundai Motor. It also builds cylinder batteries for Tesla.
CHANGE CHANGE CHANGE
A particular concern for operators at auto parts suppliers was Volkswagen ‘s lack of consultation with LG and SK on battery replacement, a break with tradition from the business strategies that Toyota started decades ago.
When LG told Volkswagen that it would send an action group to Germany to discuss the possible battery change, Volkswagen told LG not to, the three people familiar with the situation told Reuters. They refused to be recognized as not having the authority to speak to the media.
“This is rare among well-established manufacturers and suppliers,” said Yale Zhang, head of Shanghai-based automotive foresight advisory group Yale Zhang. “Traditionally, device manufacturers invite major suppliers to discuss future technology before finalizing what they need to ensure supply.”
It comes just days after Panasonic CEO Kazuhiro Tsuga told the Financial Times that his company had to “graduate from our one-legged approach to rely solely on Tesla.” Panasonic lost its prestigious ten-year position as Tesla’s sole supplier last year when the retailer unveiled plans to start developing its own batteries and add LG and CATL as buying partners.
Two sources said the situation of Reuters SK and LG was complicated by the U.S. legal battle between the bitter rivals that have threatened to block the production of Volkswagen EV at its Tennessee factory and left the carmaker “very unhappy. happy ”with the couple.
“Volkswagen warned South Korean battery manufacturers early last year that Chinese battery manufacturers would benefit from the legal controversies,” one told Reuters.
BAN CHINA
China, the world’s largest car market and a major battleground for EV, is the winner in Volkswagen’s move from the lightest pouch batteries to safer and easier-to-find prismatic batteries.
In addition to dealing with CATL, Volkswagen told Reuters that it planned to acquire batteries from Wanxiang A123 and Guoxuan High-tech Co. Ltd. A source close to Guoxuan told Reuters that it plans to strike a supply contract for lithium iron phosphate batteries in a year or more. .
There seemed to be other suppliers in China, Volkswagen said, as it begins to roll out five models of the ID series of EVs this year.
“The Chinese have become very strong at the technological level which means that the supply side is bigger,” Volkswagen CEO Herbert Diess told Reuters, adding that he believed the company was still a relevant purchase for LG and Samsung SDI, which provide prismatic batteries.
“We need every cell, every ability available,” Diess said. “But we will have a greater say in cell design.”
Reporting with Heekyong Yang in Seoul, Yilei Sun in Beijing and Christoph Steitz in Frankfurt; Edited by Sayantani Ghosh, Joe White and Jane Wardell