Just as John D. Rockefeller’s Standard Oil dominated the crude industry in the 19th century, the battery era of the future will have its own winners and losers. Some businesses will emerge as new champions, while others will adapt and dominate in new areas. Carlos Tavares, the head of Stellantis, the world’s fourth-largest carmaker, warns that in a Darwinian world, failure to adapt means extinction.
Car manufacturers, mining companies, and battery developers are all vying for a place in the next-generation battery market and forming alliances while taking technological risks. The market is highly dynamic, with winners today potentially becoming losers tomorrow and vice versa. It’s a rapidly changing landscape that poses challenges in picking the right strategies.
Regardless of the dominant technology, the batteries powering future electric vehicles will require a significant amount of mining and processing. Electric car motors contain rare metals not found in combustion engines, and there are forecasts of shortages of lithium, nickel, and cobalt, which are crucial for battery production. As a result, mining companies like BHP and commodity traders like Glencore stand to benefit from the EV revolution.
However, emerging technologies and changing demands make it difficult to predict winners. Lithium miners, such as Albemarle and SQM, believe their material will continue to be essential in various battery types. But even they face the possibility of their market position diminishing if alternative batteries, such as sodium-ion, gain popularity.
China currently dominates the processing of mined raw materials into battery-grade chemicals, raising geopolitical concerns. As a result, Western groups are racing to develop processing capabilities outside of China. Western companies like Albemarle, Pilbara Minerals, and Syrah Resources are seeking alternative sources for raw materials.
The competition among battery producers is predominantly led by Asian companies, with China’s CATL being the global leader. Korean companies LG Energy Solution and BYD are trying to catch up, while Japan’s Panasonic and Korean companies SK On and Samsung SDI are also contenders. Chinese companies have enjoyed the booming domestic EV market, giving them an advantage.
However, Chinese battery and car companies face uncertainty in the US due to the Inflation Reduction Act, which incentivizes the production of batteries that are free from Chinese components. LG Energy Solution is betting on rapid growth in the US EV market to catch up with CATL.
Carmakers are also seeking control over battery supply chains. Traditionally, car companies rely on suppliers for most components, but electric vehicles change that dynamic. The big question for carmakers is how much of the battery they will own. Some manufacturers are investing in their own battery systems to guarantee supply and monopolize their developments. General Motors, for example, has developed a system that will underpin all new EV models and has even invested in mining groups.
Volkswagen has created a unit called “Power Co” to supply some of its battery needs. Germany’s largest carmaker believes owning the technology will allow them to control costs and make breakthroughs that other companies cannot access. However, Nissan made the opposite move and sold its battery business to a Chinese company, betting that batteries will ultimately become commoditized.
While owning battery technology may provide a competitive edge in the luxury segment where performance matters, there is debate among carmakers about whether investing in batteries is the right move. Some executives believe that leaving battery production to specialists would be a logical choice and treat it as a commodity. Even Tesla, the market leader in electric vehicles, sources batteries from CATL for its popular models.
The future of the battery industry is uncertain, with various players vying for dominance. Research budgets and partnerships offer insights into which companies are best positioned. However, the industry remains highly competitive and dynamic, posing challenges for all players involved.
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