Who will control the electric car market?

Type de publication:

Conference Paper

Auteurs:

Bruno Jetin

Source:

Gerpisa colloquium, Paris (2019)

Résumé:

The internal combustion engine and the overall architecture of the car, based initially on a chassis and then a platform, have established for more than a century the dominance of carmakers on the automobile industry. The surge of the electric car, whose sales hit two million worldwide in 2018, may be the opportunity to reshuffle the cards between the different stakeholders of the automobile industry. Carmakers may lose the control over the production of the engine and their dominance will be fragilised. The reason lies in the production of the battery pack which involves a different set of actors who want the largest possible share of the market value.
Batteries need metals and alloys, mainly lithium, cobalt, manganese, aluminium, nickel and copper. These natural resources are located in a few countries and dominated by large mining companies. They are in a strong bargaining position because some of the metals like cobalt and nickel, are relatively scarce and their price is very volatile which may contradict the necessity to reduce the price of electric cars.
Oil and gas majors, do not intend to stay passive and simply observe the energy transition and the decline of oil demand. They are now making deals along the electricity supply chain. They invest in power generation with gas; they penetrate the market for household energy supply, which has previously been controled by utilities; they acquire electric charge points for electric cars. Repsol has set up a joint venture called Wible in Madrid with South Korea’s Kia Motors for a fleet of 500 hybrid vehicles; Shell has acquired New Motion, one of Europe’s largest electric vehicle charging companies and 100 per cent of Sonnen, a German rival to Tesla and Samsung in providing homeowners with lithium-ion battery packs powered by solar energy. BP has bought the UK’s largest electric vehicle charging network Chargemaster; and battery start-up StoreDot. Total has bought SAFT, a battery producer. This also increases their bargaining power with carmakers.
Battery manufacturers are a third set of key players for the future of the electric car. The battery industry is divided in three main segments that drive technological innovation: batteries for portable electronics, traction batteries for EV, and stationary battery energy storage systems for grids and renewables. Batteries for portable electronics have long dominated the market in terms of volume thanks to the massive sales of smart phones, but the traction batteries have caught up since 2017 in terms of battery capacity, which can be from 1000 to 5000 times higher, so that the two markets are now comparable. The stationary storage market is also growing rapidly. To meet the growing demand, battery manufacturers will have to increase manufacturing capacity by somewhere between 7 and 10 times what it is today. This involves huge investments that only big companies can realise and not all car producers are ready to do it. In fact, they are adopting a variety of different strategies, from complete outsourcing of battery packs to in-house production. Some also engage in energy storage system. This reveals very different approaches to the importance of controlling battery packs manufacturing to maintain the control over the industry.
The uncertainty among the industry regarding the relative role and share of the various stakeholders is compounded by a geopolitical factor. China has become the main market for electric cars and other vehicles and the main battery pack producer. It has secured the largest resources of key metals like cobalt and nickel across the world which are shipped and refined in China. This makes many South Korean and Japanese battery producers, like Samsung and Panasonic, worried about their dependence from China. In 2010, China, which produces 85% of rare earths, had restricted rare-earth metals exports vital to Japanese tech firms after a maritime squabble.
Our contribution will embrace these various aspects of the electric car market to assess the future restructuring of the automobile industry and the potential changing role of the major stakeholders.

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