Auto makers, pumping billions of dollars into developing electric cars, are now facing a critical choice: get more involved with manufacturing the core batteries or buy them from others.
Batteries are one of an electric vehicle’s most expensive components, accounting for between a quarter and a third of the car’s value. Driving down their cost is key to profitability, executives say.
But whereas the internal combustion engine traditionally has been engineered and built by auto makers themselves, battery production for electric cars is dominated by Asian electronics and chemical firms, such as LG Chem Ltd. and Panasonic Corp., and newcomers like China’s Contemporary Amperex Technology Co.
With regulators world-wide pushing car companies to sell more electric cars, auto executives worry there won’t be enough factories building high-quality batteries.
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California, the U.S.’s largest car market, said last month it would end the sale of new gasoline- and diesel-powered passenger cars by 2035, putting pressure on the auto industry to accelerate its shift to electric vehicles.
The race to lock in supplies for electric cars has auto makers taking varied paths.
While most make the battery pack, a large metal enclosure often lining the bottom of the car, they also need the cells that are bundled together to form the core electricity storage.
Tesla several years ago opened its Gigafactory in Nevada to make batteries with Panasonic, which in the shared space would produce cells for the packs. The electric-car maker wanted to secure production specifically for its own models and lower manufacturing and logistics costs.
Now it is looking to in-source more