BMW and Stellantis are in talks with Panasonic over the development of new battery plants for EVs

A joint venture between Stellantis STLA -2.50% NV and Bayerische Motoren Werke AG may be in the works to build electric-vehicle battery plants in North America with Panasonic PCRFY 2.08% Holdings Corp., people familiar with the talks said.

‍

As a specialist in cylindrical batteries, Panasonic manufactures a product that resembles an oversized version of the common AA batteries found in most consumer devices. The Japanese company Panasonic is a major supplier of cylindrical cells for Tesla Inc., which is the world's largest car manufacturer and has been churning out billions of them over the past decade.

‍

There are tens of billions of dollars that are being spent by automobile and battery manufacturers to build capacity for electric vehicle batteries and they are making choices now about technology that could shape the industry in the future. To date, most legacy automakers prefer rectangular pouch or prismatic-shaped batteries over cylindrical batteries and usually choose between the two shapes depending on their preference.

‍

The cylindrical batteries tend to be smaller, which means that thousands of them need to be strung together to provide power to a car. There are some risks associated with that, such as higher costs and the potential for manufacturing defects. Alternatively, the cylindrical type is considered a relatively safe type of battery because it can pack more power and is easier to handle.

‍

The focus of auto manufacturers has led Panasonic and others to develop larger variations of cylindrical batteries, Ram Chandrasekaran, who until a month ago oversaw Wood Mackenzie's road transportation research, said.

‍

According to Mr. Chandrasekaran, "Recent interest demonstrates we're at a point in the development of EV technology where cylindrical cells perform fairly well."

‍

The third North American EV battery factory will be announced during the current April-June quarter, according to Stellantis, whose brands include Chrysler and Jeep. Two have already been started, one in Indiana with Samsung SDI Co. and the other in Canada with LG Energy Solution Ltd.

‍

As a potential partner for the third factory, Stellantis is in talks with Panasonic, according to persons with knowledge of the negotiations. However, they cautioned that these talks are still in the early stages and that several concerns need to be resolved.

‍

According to SNE Research, Panasonic will produce about 7% of all EV batteries used in 2022, trailing only LG Energy (14% of the market) and Contemporary Amperex Technology Co. (37%).

‍

In the early years of Tesla, the electric vehicle manufacturer, and Panasonic, its battery supplier, mostly conducted business together. Panasonic executives have stated that they wish to increase the company's customer base. More recently, Tesla has started purchasing from other Asian battery manufacturers in addition to Panasonic. EV manufacturer Lucid Group Inc. will receive batteries from Panasonic, according to a statement made in December.

‍

Recently, the Japanese manufacturer has been planning an expansion into the U.S. as well as developing a more powerful cylindrical cell that is more efficient. Elon Musk has posited that Panasonic's 4680 battery, which has a circumference of 46 millimeters and a height of 80 millimeters, is much larger in size than the cells it has supplied to Tesla, and that the larger size will unlock a lower cost for electric vehicles.

‍

Panasonic's batteries have attracted a lot of attention from companies like Stellantis, as well as BMW (BMW -2.22%).

‍

The BMW company announced last year that the new generation of EVs it would be introducing in 2025 would use cylindrical batteries rather than the rectangular prismatic ones that it had used in the previous generation. BMW executives discussed the reasons for the shift during a recent earnings call and cited cost savings, an increase in range, and more efficient charging as reasons for the shift. 

‍

BMW has announced that it will build six new EV battery plants across Europe, China, and the North American free-trade area that includes the United States, Canada, and Mexico, as part of its future growth plans. CATL and Eve Energy Co., Chinese battery suppliers, informed the company in September that they had been awarded contracts in the “two-digit billion euro range” for the construction of two factories each in China and Europe. 

‍

Following that announcement, BMW said that it would source batteries in the United States from Envision AESC, a subsidiary of the Chinese renewable energy company Envision Group, which is based in the United States.  

‍

It has been more difficult for Chinese battery manufacturers to operate in the United States as a result of political tensions in recent years. There are a number of reasons why BMW is talking to Panasonic, according to people familiar with the matter. 

‍

Peter Lamp, BMW's head of battery-cell technology, said in a statement that the company was in talks with potential suppliers for additional battery projects, but that no contracts had been signed as of yet. There was no specific company that he wanted to mention.

‍

The transport analyst Chandrasekaran said the technology behind rectangular-shaped batteries is also improving and that there is not likely to be a single winner in the near future.

‍

The BYD Company, a Chinese manufacturer of both batteries and electric vehicles (EVs), has developed a prismatic model of battery called a blade battery, which contains a multitude of long, flat cells slid into the battery pack in a blade-like fashion. This structure, according to BYD, makes maximum use of space as well as maximizes energy density and efficiency.

‍

There is a possibility that automakers will stick with prismatic batteries for certain types of vehicles, such as low-cost, moderately-performance vehicles, according to Mr. Chandrasekaran.