LG's major customer "defected" to lithium iron phosphate batteries

On the road to electric vehicle transformation, it is obvious that power batteries cannot be bypassed.

Electric vehicles have three core technologies, namely batteries, motors and electronic control systems, which are also collectively known as "three electric technologies", of which the power battery has the highest cost, accounting for 30%-40% of the vehicle cost.

In order to reduce costs and become more competitive in the low-end electric vehicle market, major car companies have to focus on power batteries. As a result, lithium iron phosphate batteries with "improved performance and better cost" have become the favored objects of the market.

Recently, following Ford, another United States auto giant announced its "defection" to lithium iron phosphate batteries.

General Motors has announced that it will abandon the Ultium battery, which has been heavily invested in recent years, in favor of lithium iron phosphate battery technology to expand the battery types and chemistries used in its electric vehicles, and realize more flexible and personalized battery solutions.

Meanwhile, the company's vice president of GM's battery division said at an investor conference that the company plans to open a battery R&D center at its technology center in Warren, Michigan, in 2027 to better compete with dominant Chinese battery makers.

01

Deprecate the Ultium battery in partnership with LG

For a long time, in the choice of power batteries, the European and American markets are more inclined to ternary batteries with higher energy density.

General Motors is no exception, and began to cooperate with LG Chem in Korea in the early days, and the two sides jointly launched the Ultium battery four years ago based on the ternary (multiple) route. At that time, LG Energy Solution had not yet been officially spun off from LG Chem.

In 2020, GM partnered with LG Chem to officially launch the Ultium battery technology and brand, and plans to produce Ultium batteries at its Ohio plant in 2022. At present, Ultium batteries have been used in many electric vehicles such as Chevrolet Equinox and Blazer EVs, Cadillac Lyriq, and Hummer EVs.

However, Ultium batteries use nickel, cobalt, manganese, etc. as the main materials, which does not have a cost advantage at present. As a result, despite the impressive growth in GM's electric vehicle sales, the business has been in a loss-making state, and it is reported that in 2023 alone, GM's electric vehicle business will lose as much as $2.5 billion.

The industry believes that under this situation, unless GM abandons the transition to electrification, it is inevitable that it will "emulate" Tesla, Ford and other car companies to switch to lithium iron phosphate batteries.

GM said it plans to reduce battery costs to an average of $60 per kilowatt-hour between 2023 and 2024, and expects to reduce it by a further $30 in 2025 by adopting lithium iron phosphate batteries.

In fact, GM's actions in "cost reduction" do not stop there. GM has been part of the layoffs since 2023 and recently announced that it will lay off more than 1,000 salaried employees worldwide. It said that the layoffs are mainly to cut costs to meet the challenges of the development of the automotive industry, while focusing on investing in new business areas.

On the electric vehicle side, GM also suspended its third battery plant (with an annual production capacity of 50GWh) in cooperation with LG Energy Solution in July this year in order to cut manufacturing costs. In addition, the company announced that it will reintroduce hybrid vehicles into its lineup to increase its competitive advantage.

02

Or join hands with CATL to build a factory in the United States

There are three traditional car companies in the U.S. market: Ford, General Motors, and Chrysler.

Among them, Chrysler's electric vehicle program is the slowest to develop, with plans to launch its first all-electric vehicle in 2025 and electrify its entire product line in 2028.

In the process of electrification transformation, it is unknown whether Chrysler will be influenced by the former and choose lithium iron phosphate batteries. But it's clear that Ford and GM have already made up their minds and finalized their partnerships.

In February this year, Ford Motor CEO Ji·m Farley officially announced in Detroit, Michigan, United States that it will cooperate with CATL to invest $3.5 billion in Marshall, Michigan, to build a new lithium iron phosphate power battery plant, which is expected to be put into operation in 2026.

Ford and CATL have adopted a "technology licensing" cooperation model. CATL will be responsible for building the battery production line, building the supply chain, commissioning the production line equipment and managing the manufacturing process, while the capital expenditure of the factory will be borne by the car company.

In addition, in order to avoid political controversy in the United States, Ford did not choose to establish a joint venture with CATL directly, but owned the new plant through a wholly-owned subsidiary.

And GM also seems to be "fanciing" CATL. News on September 13 showed that GM is negotiating with CATL to purchase CATL technology, and the two sides hope to build a new factory in the United States to produce batteries.

According to people familiar with the matter, the battery plant is funded and operated by TDK, a Japan consumer electronics parts manufacturer. The new plant is expected to be located in the southern United States and is likely to create more than 1,000 jobs.

Referring to Ford, limited to local policies and investment risks, the cooperation between GM and CATL will also be carried out through "technology licensing".

Combined with GM's recent news, the factory it cooperates with CATL is very likely to produce more cost-effective lithium iron phosphate batteries.

It is worth noting that GM's battery supplier has always been LG New Energy, although the third battery plant of the two sides in Michigan, United States is planned to be suspended, but LG New Energy has begun to deploy lithium iron phosphate batteries.

At present, LG new energy power lithium iron battery has not been put on the market, but it has won a large order of Renault Ampere 39GWh. In the future, it is not impossible whether LG Energy Solution will continue to cooperate with GM on lithium iron phosphate batteries.

In the field of power batteries, Tesla, Ford, General Motors, Toyota, Hyundai and other well-known car companies are building their own supply capacity, in a narrow sense, every car company wants to become BYD, but it is obvious that only battery technology and supporting capacity, no car company can reach its level at present.

Therefore, in the long run, most domestic and foreign car companies will also rely on battery companies to provide technical support, and it is foreseeable that open cooperation such as "technology licensing" will continue to prevail, especially in foreign markets.