CATL to Deepen Ties With Honda on Battery Development
Comment of the Day

December 08 2022

Commentary by Eoin Treacy

CATL to Deepen Ties With Honda on Battery Development

This note from Bloomberg may be of interest. Here is a section:

China’s Contemporary Amperex Technology, the world’s biggest maker of electric-car batteries, signs a global partnership agreement with Honda Motor, according to an exchange filing to Shenzhen Stock Exchange.

Eoin Treacy's view

China has worked hard to capture the market for EV batteries and that is now paying dividends. Traditional car companies all now want to be EV companies but are years behind in building their own factories and supply chains. That is most especially true for batteries. China has a dominant position in mining and processing the respective raw materials. The implication is clear, there is no way for car companies to achieve their EV goals without outsourcing at least part of the process to Chinese companies.

A major change in the attitude to supply chain management will be required to remedy that situation. It suggests the inventory light, just in time business model, is unsuitable for this market. Forty years ago the major US manufacturers were major commodity traders. They abandoned that business model in favour of globalization but that is no longer compatible with the global reality.

Mexico’s ambition to be a major supplier of lithium and batteries to the US auto sector is a partial solution for later this decade. Building domestic lithium mines is also a partial solution provided that is followed up with processing facilities. Of course there will also be demand for more copper miners, aluminium smelters etc. and no appetite among the general population to have any of those facilities located within 1000 miles of where they live.

This article discussing the dire consequences of this migration for the UK automotive industry is applicable to most countries. The harsh reality is EVs require fewer parts and therefore fewer workers to manufacture them. Here is a section:

The broader UK car industry, on the other hand, could be in trouble. It’ll be difficult to import batteries in bigger volumes because they cost about six times what engines do. The amount of downsizing that’s occurred in auto assembly also works against the business case for battery suppliers to swoop in.

“If you think of the manufacturers in the UK, there’s not sufficient critical mass,” Hallmark said. “You’ve got not enough production in the UK — not only for batteries, by the way, for many other major components. You don’t have enough critical mass of a ubiquitous-design cell to get the economies of scale that you need.”
CATL expects to have its next generation sodium-ion battery in the market next year. That puts China’s automotive sector in a strong position to gain market share. The stock is currently firming from the region of the trend mean.
BYD is currently firming from the region of the 1000-day MA.

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