Volvo taps Asia for EV battery supplies

By Reuters - Global Times Source:Reuters-Global Times Published: 2019/5/16 20:48:42

Long-term deals offer certainty, prospects of lower costs

Volvo vehicles are displayed at the Shanghai Auto Show in April. Photo: IC

Swedish carmaker Volvo said on Wednesday it signed long-term battery supply deals with Asia-based companies LG Chem and Contemporary Amperex Technology Co Ltd (CATL), as it pushes its electric vehicle (EV) target of 50 percent of sales by 2025.

The agreements follow a series of pacts between Asia-based battery companies and global carmakers, which plan a $300 billion surge in spending on EV technology over the decade.

Long-term battery supply arrangements are much valued by carmakers and investors, as they help to clear supply bottlenecks at a time of soaring demand. They also hold the promise of cheaper batteries over time.

Volvo Cars is investing about 5 percent of its annual revenue - a little more than $1 billion a year - on electric and driverless cars.

The company, owned by China's Geely, is launching EV models under the Volvo marque and luxury performance sub-brand Polestar as it takes on global peers including Volkswagen, Tesla and General Motors.

Volvo has said it plans to get half its sales from fully electric cars by 2025 and expects its margins on electric cars to match those of vehicles with internal-combustion engines by that time.

"The future of Volvo Cars is electric and we are firmly committed to moving beyond the internal combustion engine," Volvo Cars President and CEO Hakan Samuelsson said in a statement on Wednesday.

The battery deals were valued at several billion dollars but the companies did not disclose details.

Volvo said its first battery assembly line was under construction at its manufacturing plant in Ghent, Belgium, and would be completed by the end of this year.

It is building plug-in hybrid variants of the XC40 in Ghent and plans to make fully electric XC40s there, according to the company.

European automakers typically source EV batteries from companies in China, South Korea and Japan, which dominate the supply chain.

Playing catch-up

The US has recently sought to limit China's EV supply chain dominance, Reuters reported on May 2.

While Tesla, Volkswagen and other electric-focused automakers and battery manufacturers are expanding in the US, they are reliant on mineral imports without a major push to develop more domestic mines and processing facilities.

China produces nearly two-thirds of the world's lithium-ion batteries - compared with 5 percent for the US - and controls most of the world's lithium processing facilities, according to data from Benchmark Minerals Intelligence, which tracks prices for lithium and other commodities.

The US is not the only country playing catch-up with China. France and Germany asked the European Commission recently to support a 1.7 billion-euro ($1.9 billion) battery cell consortium to offset Asian rivals' growth in the sector.

US Senator Lisa Murkowski, the Alaska Republican who is chair of the Senate's Energy and Natural Resources Committee, said China's lead in the EV supply-chain sector gives the country an edge in the ongoing US-China trade dispute.

"From a national security perspective, when you are vulnerable, as the US is and many of our friends and allies are, on a resource that you need, that is a weakness," Murkowski said. "We don't want that weakness to be exposed."

Posted in: COMPANIES

blog comments powered by Disqus