Unlike some of its rivals in the green car marketplace, Japanese automaker Nissan produces all of the lithium-ion battery packs it needs for its all-electric Nissan LEAF and e-NV200 electric van itself at dedicated battery production facilities in Japan, the U.S. and UK.
As Reuters claimed yesterday however, Nissan is in the process of rethinking its battery manufacturing process, closing or reducing in-house battery manufacture from current levels.
It’s a rumour — one which Nissan isn’t officially confirming as yet — which has already caused many electric car skeptics to claim that Nissan is rethinking its electric car strategy. But dig a little deeper, and the reasons behind a potential in-house battery production cull are far more practical and pragmatic.
The first of these is cost. While Nissan initially moved to its own in-house battery manufacture with the intent of dramatically reducing the cost of battery packs and thus its electric vehicles, Nissan hasn’t quite managed to achieve its own goals in terms of cost per watt hour.
“We set out to be a leader in battery manufacturing but it turned out to be less competitive than we’d wanted,” a Nissan executive reportedly told Reuters on condition of anonymity. “We’re still between six months and a year behind LG in price-performance terms.”
South-Korean firm LG-Chem is currently the battery firm of choice for many automakers looking to produce their own plug-in cars. In recent years, General Motors, Ford, and Audi have all used LG Chem battery cells in their electric and plug-in hybrid cars, alongside Nissan’s automotive partner Renault. Despite working together closely on other aspects of electric vehicle development, Nissan and Renault have traditionally worked independently on their electric car battery programs, with Renault relying on LG-Chem for its battery cells rather than using Nissan’s in-house battery cells.
“Renault would clearly prefer to go further down the LG sourcing route, and the Nissan engineers would obviously prefer to stay in-house,” another anonymous source said. “The write-off costs are potentially huge.”
In the end however, If it costs Nissan more to produce batteries in-house than it does to buy them in from a first-tier supplier like LG Chem, business logic would suggest that switching to an external supplier is the most sensible way to ensure that Nissan’s electric car fleet continues to expand its market grasp.
Then there’s the matter of energy density. In the competitive world of plug-in cars — where companies like Tesla are currently leading with ranges per charge which far exceed any other plug-in car on sale — there’s a race on to produce the longest-range electric car possible.
With both the second-generation Nissan LEAF and second-generation Chevrolet Volt due to hit the market within the next eighteen months or so, both companies are working hard to produce a competitive, affordable long-range plug-in vehicle. Add the spectre of the upcoming 200+ mile 2017 Tesla Model ≡ — which Tesla says will retail for around $35,000 — and the buzz word for second-generation electric cars is clearly range.
In order to achieve that longer range however, automakers have to ditch existing battery chemistry and build battery packs with a higher energy density. Essentially a measure of how much energy can be stored per unit mass, higher energy density battery packs make it possible to travel further per charge without needing to devote more space to a physically larger battery pack.
What’s more, LG Chem has already proclaimed that it will be building a 200-mile battery pack for at least one major automaker for 2016. If it can produce that for less than Nissan can produce it, then it makes sound business sense for Nissan to look to LG Chem for its battery manufacture.
But perhaps the most logical reason for Nissan switching from its in-house battery manufacture to an external supplier comes from Tesla Motors, whose massive $5 billion lithium-ion battery manufacturing and recycling Gigafactory is set to be producing up to 50 Gigawatthours of lithium-ion battery packs by 2020.
Set to be the largest battery manufacturing facility in the world, the Gigafactory will be capable of producing lithium-ion battery packs at a fraction of the cost of existing battery plants around the world. Many orders of magnitude larger than Nissan’s in-house manufacturing facilities, the only way for Nissan to truly compete with Tesla in terms of price per kilowatt-hour and miles per unit price is to switch to larger-scale battery manufacturers like LG Chem — or perhaps to work with other automakers on its own Gigafactory project.
When pushed, Carlos Ghosn, joint CEO of both Nissan and Renault, commented that Nissan may open up its battery supply chain to include suppliers like LG-Chem, but didn’t comment on the future of Nissan’s own in-house battery manufacturing processes. In an official statement from the Renault-Nissan alliance, the alliance said that Nissan was “100-percent committed to its industry-leading electric vehicle programme,” and wasn’t about to write down its massive investment in electric vehicle battery technology.
What that means in real terms isn’t clear, but we can tell you one thing for certain.
Nissan isn’t about to give up on its electric car plans. And with Nissan’s next-generation LEAF due very soon, a longer-range LG Chem battery pack could be just what Nissan needs to keep the cost of its best-selling LEAF at the right price.
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