Tesla's battery ambitions & acquisition cast doubt on Panasonic partnership
Tesla's announcement that it plans to shift to in-house production of electric vehicle batteries has cast doubt over the carmaker's longtime supply partnership with Panasonic.
Stocks in the Japanese company dropped by 4% in Tokyo following the announcement, dashing hopes for expected growth for the business.
Tesla CEO Elon Musk revealed last month that it had ambitions to produce battery cells equivalent to 100 gigawatt-hours by 2022 - enough to power 1.4 million vehicles, and around three times the volume which Tesla buys from Panasonic today.
Tesla has said that it does not intend to end relations with battery suppliers. Musk was quoted as saying that his company actually intends "to increase, not reduce" battery cell purchases from outside suppliers.
However, the CEO also said that the planned batteries to be produced by Tesla would greatly reduce the cost of electric vehicles due to higher efficiency and cheaper materials.
"I think probably, like soon, about three years from now, we're confident we can make a very competent, very compelling, $25,000 electric vehicle that's also fully autonomous," said Musk.
Panasonic's approach to Tesla has largely been on a wait-and-see basis. The US automotive company had previously been purchasing batteries from other suppliers, including South Korea's LG Chem.
A Panasonic executive reiterated the company's stance and was quoted by the FT as saying it was "not our intention that a single company meets all of Tesla's demands."
It is estimated that around 30% of the cost of an electric vehicle consists of the lithium-ion battery. Tesla has been busy incorporating competencies linked to battery manufacture.
In May 2019, the carmaker purchased Maxwell Technologies, a US-based energy storage company in a deal reportedly worth around $218 million (€185 million).
At the end of last week, it was widely reported that Tesla had agreed to acquire German ATW Automation, a supplier assembling battery packs and modules for the automotive industry, for an undisclosed amount.
ATW, a subsidiary of Canadian ATS Automation Tooling Systems Inc., was on the brink of liquidation due to a slump in orders, German media reported in September.
As well as batteries, ATW produces transmission assembly lines and has contracts with Daimler AG, BMW and ZF Friedrichshafen, which are likely to be slowed phased out in order to focus exclusively on Tesla.
With Tesla's third EV manufacturing plant - or "Gigafactory" - under construction just outside Berlin, the acquisition is widely believed to be part of the US automaker's drive towards shoring up skills and equipment in order to streamline European production and drive down prices for electric vehicles.
Musk's announcement of a $25,000 electric car would allow the company to maintain a competitive advantage and make the products on a par with combustion engine vehicles in terms of affordability.
The race to create EV batteries has spilled over into materials procurement. The supply of cobalt - a blue-greyish metal that is an essential ingredient in lithium-ion batteries, as well as laptops and smartphones - will likely become even tighter.
Whilst cobalt is mined all over the world, 50-60% of the global supply comes from the Democratic Republic of Congo (DRC). The central African nation, ravaged by civil wars and one of the continent's poorest, also has a poor human rights record.
Amnesty International estimates that there are presently around 40,000 children involved in cobalt mining in DRC where they earn a daily wage of between $1 and $2.
In December 2019, a landmark lawsuit was filed in the US against five major tech companies - including Tesla - on the behalf of 14 Congolese families. The lawsuit also named Apple, Dell, Microsoft and Google parent Alphabet as being complicit in the death of children working in cobalt mines.
However, Tesla said at last month's "Battery Day" presentation that it was working on the development of cathode materials that used no cobalt. While the carmaker is hoping that the innovation of its staff and partners will resolve the risks associated with and damage caused by raw materials such as cobalt, it is yet unclear how viable it is as a goal due to the level of engineering involved.
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