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Automakers Seek Fix to EV Supply Chain Problem

In an effort to take more control of the electric-vehicle supply chain, automakers are forging new relationships with raw materials producers and investing in new facilities, according to The Wall Street Journal (subscription).

EV efforts: Major vehicle manufacturers are spending heavily on EV-battery moves. These include General Motors’ investment, with Korean steel and chemical maker POSCO, in a North American factory to make cathode materials, a crucial component of EV batteries, and a deal last summer “to invest in a geothermal-extraction project in California’s Salton Sea for lithium.”

  • Such car industry efforts also include Toyota’s plans to construct a $1.29 billion battery factory in North Carolina and Nissan’s move to build new battery-recycling factories in both the U.S. and Europe by the end of fiscal 2025.
  • “Now, they are also looking to expand further as they seek to lower costs, secure sought-after components and exert more control over battery quality and performance.… The push by automakers to control more of their supply chains also comes as a semiconductor shortage has hampered vehicle production.”

Vertical integration: Historically, vehicle manufacturers have been successful at increasing their profitability by “pitting suppliers against one another,” but given the small pool of battery-chemical suppliers, such a strategy is no longer possible.

  • Instead, they have begun to embrace components of vertical integration, in which a manufacturer owns or acquires a large part of the supply chain needed for production.
  • “‘There’s a lot of pressure to integrate,’ said Ulderico [Ulissi], an analyst at research firm Rho Motion. Those that don’t, he said, risk becoming overly dependent on battery suppliers for the car’s costliest technology and ceding margin to them.”
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