Why Electric Car Companies Don’t Need Batteries

No car company outside China makes batteries for their electric cars. Investors should hope it stays that way.

Japanese group Panasonic makes the battery cells in Tesla’s much-hyped “gigafactory” in Nevada. Other global car makers also outsource production of cells to East Asian specialists, even if they assemble them into battery packs in their own plants. Mercedes-owner Daimler is plowing $1.2 billion into what it calls “battery factories” in Germany, China and Tuscaloosa, Alabama, but these too will buy cells from others.

Whether this arrangement is sustainable is a live debate in boardrooms, particularly among Germany-based auto makers Volkswagen, BMW and Daimler. One question is whether the existing battery industry will produce enough cells to satisfy expected orders. Others are strategic: Can car makers get an edge by making their own cells, and can they squeeze profits out of what so far has been a highly competitive, low-margin business?

. . . The debate is partly political. As electric vehicles gradually replace cars powered by the internal combustion engine, how will workers in the old supply chain be employed? And will U.S. and European governments be happy for such a key component of the automotive industry’s future to be built exclusively by East Asian manufacturers. In October, European Union authorities in Brussels called for an “Airbus for batteries.”

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