The recent Paris Auto Show announcements from Mercedes-Benz and Volkswagen about their extensive future electric vehicle models demonstrate both the importance that auto OEMs are placing on battery technology and the fact that some OEMs are planning direct investments in the battery industry. In line with these two announcements, Daimler described earlier this year at the Geneva Auto Show that its Accumotive battery subsidiary will spend $550M on a second battery pack assembly plant, tripling its production capacity. Despite the investment in building battery packs, however, according to autonews.com, Daimler has firmly declined to invest in actual battery cell production, citing huge overcapacity in the industry that has turned cells into a commodity.

Volkswagen, on the other hand, according to Bloomberg, is considering a battery partnership with Panasonic or LG Chem to build battery cell factories in joint ventures similar to Tesla’s gigafactory in Nevada with Panasonic.  Bloomberg further reports that VW’s supervisory board is currently considering investing €1.7 to 2 billion per factory at several sites on different continents.  At the Paris Auto Show, VW announced three EV platforms that will lead to as many as thirty electric vehicles for the various brands in the Volkswagen group.

Bloomberg writes that Deutsche Bank analysts believe that if VW were starting now to develop and build its own EV batteries to a comparable technical and cost level as the current leading battery manufacturers, it could easily take a decade. Furthermore, Bloomberg reports that the Chinese government this year made supporting battery development a top priority, suggesting price competition will only intensify and increasing the risk of a “white elephant” if VW went it alone building a battery plant from scratch.

 This exploration of various business models between auto OEMs and battery manufacturers is increasing, and we at Cadenza Innovation are determined to be part of this next chapter of the new electric transport era which will give auto OEMs without committed battery capacity another future potential option.