Asian Factories Dominate EV Battery Market
Bottlenecks and Bargaining Power
Demand for electric vehicles is booming and carmakers are rushing to keep up. Batteries are a critical component of these EVs and at the moment there is a gap between the amount of batteries being produced and the amount of batteries EV makers need to fulfill their short-term production goals.
As a result, new battery factories are springing up in China, Japan, and South Korea. These factories yield more bargaining power over carmakers than traditional parts suppliers because electric car companies are so desperately in need of batteries.
Relations Between EV Makers and Battery Suppliers
Tensions between EV battery makers and car producers have been high recently for a number of reasons. There have been intellectual property disagreements, logistics difficulties, supply chain disruptions, and product recalls.
Because of bottlenecks in the battery supply chain earlier this year, Volkswagen AG paused production of its e-Tron, and Jaguar Land Rover Automotive Plc (TTM) had to temporarily stop making its I-PACE model. Four EV models have also been recalled because of battery-fire risks.
Despite these difficulties, EV makers are finding ways to work with their foreign battery suppliers because these products are crucial for meeting the onslaught of demand for electric vehicles.
The rush to build electric car batteries has been called “a new arms race.”
Currently, US electric vehicle companies are very dependent on foreign battery makers. European countries are working to spur more domestic EV battery production. Some activists and lawmakers are encouraging the US to do the same. It is estimated that over 500 different EV models will be on the market by 2022. Analysts expect that by 2040 more than half of all passenger vehicles sold will be electric, meaning that EV batteries will become even more sought-after in the coming decades.
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