FAR EAST: JAPAN REPORT
Major automobile manufacturers are actively investing in automotive lithium-ion batteries. Nissan is leading among the Japanese automakers, followed by Honda and Toyota. Along with the motor and inverter, the vehicle-mounted lithium-ion battery is considered one of the “Three Sacred Treasures” of EVs.
In particular, the on-board battery is the most important as it is the source of power. In many cases, EV production will not be possible without securing a large supply of batteries through partnerships with major battery manufacturers. However, the number of battery makers with which the major automotive companies have partnered is limited: CATL ranked first in the global automotive battery market in 2021, with 39% of the market. It was followed by LG Energy Solutions (18%) and Panasonic Holdings (12%), with the top three companies accounting for 70% of the market.
North America is the area where the largest investments are being made. In Europe and China, there are many cases where construction of factories has already begun. Meanwhile, in the U.S., the Biden Administration has shifted gears toward decarbonization. Since then, GM and Ford Motor have been focusing on EVs and have teamed up with LG Energy and Korea’s SK Group to promote massive investments, each estimated to be worth about 1 trillion yen.
Japanese auto giants, which account for a large percentage of their sales in North America, have all announced new investment strategies. In response to the requirement to produce in North America as a condition for receiving tax credits under the Inflation Control Act, automakers are trying to restructure their supply chains to be completed within the region. EVs equipped with batteries using materials procured from China, Russia, and other countries are likely to be excluded from the subsidy. Nissan procures batteries from Envision AESC, which is 80% owned by Chinese capital, but there is a risk that this will not be subsidized and is seeking other procurement routes.
Honda is planning to build a $4.4 billion joint venture plant in the U.S. with South Korea’s LG Energy. Toyota plans to build a plant in the US with its group company Toyota Tsusho. Subaru, Mazda, and Mitsubishi have a large percentage of their sales in North America, but they do not have the investment capacity to rebuild their own supply chains. It is said that they may be seeking alliances.
Source: The Nikkei
PSR Analysis: Investments aimed at increasing battery production facilities and competition among automakers to procure batteries are already intensifying.
In a world where capital power is the key, smaller automakers will be forced to form alliances with other companies. EVs cannot be produced without batteries, and if OEMs cannot procure batteries on their own, they will have to purchase them from other companies.
The cost of purchasing batteries will be higher than that of other companies, and this will be reflected in the selling price of automobiles. As a result, the company’s price competitiveness will be affected, making it difficult for the company to sell its own vehicles. All companies are aware of this, which is why they are making such large investments, but from a long-term perspective, the possibility of an excess of production facilities in the market cannot be ruled out. Although this risk is not often mentioned now, an overcapacity will have an impact on battery prices.
I believe that while competition for procurement is intensifying today, it is unlikely that this situation will be the same in 10 years. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia for Power Systems Research
