With a Blockbuster Week, VW Has Ignited a New Phase in the Electric War
A multifront race in batteries, plants, and to be #2 behind Tesla
In six months, the world of automobiles has raced decades ahead: From a mere aspiration, the mass-market electric vehicle is at once a very real object planned for deployment in three or four years by nearly every automaker on the planet. Batteries thought to be fanciful are ready to be scaled up and put into those vehicles. And logistics experts who typically spend years crafting intricate supply lines for global trade are scrambling to organize everything from mines, to parts-makers, factories, and fast-charging stations — all in the next few years.
As bookends, this whirlwind period began and ended with events commemorating the battery.
In September, attention was riveted on an almost unknown battery company called QuantumScape, which presumptuously said that it was going public at an astronomical valuation of $3.3 billion and then did so. A couple of weeks later, Tesla CEO Elon Musk, holding forth at a rock concert-like lollapalooza that he, with deceptive understatement, called “Battery Day,” unveiled top-to-bottom upgrades of his battery and its ecosystem. He said the changes would knock an astonishing 56% off the battery’s cost. Suddenly, the sub-$25,000 EV was very real.
Then, this week, Volkswagen, in an unabashed copycat event that it called “Power Day,” unleashed the fury of its massive resources to demonstrate that, while Tesla holds EV primacy at the moment, it intended to grab a respected second place — and earn the top spot in time. VW splashed around plans to build not one, not two, or even three, but six giga-factories in Europe to put new battery chemistries into vehicles that will charge in just 12 minutes, and to deploy tens of thousands of fast-charging stations around the world. Wall Street heads exploded and bid up VW shares by 26% as of yesterday, to its highest price since before the 2009 financial crash.
Perhaps the pandemic accelerated events. Perhaps it was the disruptive Musk. Whatever the source of the push, the agglomeration of the six months, culminating in VW’s propulsive events this week, has overturned numerous long-standing assumptions: That exciting battery notions, like anodes made of pure lithium metal and cathodes composed of cheap manganese, were years or even decades away; that lithium metal could never, ever be used with liquid electrolyte; and that a legacy automaker could not sharply pivot to a new direction.
The disproof of all these things in these months is creating a collision of geopolitical and commercial aspiration. Around 2023 or 2024, experts believe the economies of scale will bring down the cost of batteries and EVs to parity with the sticker price of combustion vehicles. This will make the middle of the decade an inflection point that may mark the beginning of the obsolescence of the gasoline-fueled vehicle, and its replacement with electrics.
The wild card is that EVs are still largely a supply story — carmakers plan to put them into the market, but almost the sole demand has been from people wishing to make a personal statement or created by government policy. When EVs and combustion cost the same, we will find out how much organic demand there is for them. Even if EVs do take off, it will not mean that the internal combustion engine will vanish. In 1930, 22 years after the production of the first Model T, there were still, along with 26 million cars, some 18 million horses traversing the same roads. But it will be the beginning of a new type of mobility, creating a new economy that we can’t picture yet.
This period has shown how abruptly things can change even within the battery and EV space: On Monday, VW announced that its mainstream EVs would not use the standard battery chemistry, called NMC, nor the usual format, which is a pouch cell. The news of the dual decisions was a gut punch to two South Korean battery giants, LG and SK Innovation, which supply much of the world’s NMC pouch cells outside China, and was delivered to them only days before Power Day, according to Reuters.
What VW was switching to was equally surprising: batteries with a high-manganese cathode, packed into hard prismatic cells, and installed in VWs as of the end of 2024. I personally was astonished. I was not aware that such cells were ready for the market, since researchers had long ago told me that manganese lacked the energy to give an EV much range, not to mention that the metal had stability issues. Battery experts I emailed expressed similar skepticism. I wrote that into my story, which appeared Tuesday.
It turns out, though, that — just as the field has been blindsided these months by the challenge to other assumptions — a small number of companies do appear to be on the verge of commercializing high manganese cathodes. James Frith, the battery lead at BloombergNEF, yesterday tweeted a wager that VW’s business would go to a Vancouver company called Nano One. Nano One is using a spinel formulation with 75% manganese that allows for high voltage, giving it more energy than usual for the metal, and already had a joint research project with VW. I emailed Dan Blondal, Nano One’s CEO, and we spoke Wednesday.
Why would companies abandon the workhorse chemistries and bet their bread-and-butter mainstream vehicles on an experimental formulation, I asked Blondal.
“Cost,” he responded simply. Manganese is much more plentiful and cheaper than nickel and cobalt, the other two main ingredients in the standard cathode. If you could get away from those metals, you were in good shape. And that’s what Nano One’s formulation did — it is “LNMO” — lithium with 25% nickel, oxygen, and a lot of manganese. “You could be looking at close to a 50% reduction in cost,” Blondal said. “That’s why it’s so attractive. It’s not the Cadillac of batteries in terms of range, but it can address needs at low cost.”
Blondal needs to scale up. Currently, Nano One is producing cells one-inch square and 20 layers deep, much smaller than they will need to be. The company also needs to prove out a solution it has found to an issue in which oxygen gases up within the pouch cell “and the battery becomes useless.” Companies he would not name are validating the current version of Nano One’s cathode, and a pilot production line could be working as early as next year. That is a sufficient timeline to meet VW’s launch date the end of 2024, he said.
Others named a Chinese company, called SVOLT, as the likelier winner of the big VW contract. SVOLT, a spinoff of Great Wall, a Chinese auto company, has developed a different type of high-manganese cathode. Called NMx, it resembles the standard NMC, but without the cobalt. It has super-aggressive leadership and plans to open a surprisingly large 24 GWh production plant for the cathode in Germany in 2023. An SVOLT executive initially responded to a message, but did not come back with a comment.
Kevin Gunan Shang, an analyst with Roskill, a London-based commodity research firm, went for yet a third company. He predicted that BASF would get the contract. Like SVOLT, BASF has turned to a formulation modeled on the NMC. But Shang said that BASF’s version has more than twice the manganese, and that SVOLT uses almost three times the nickel. “More nickel means more cost,” he said.
A spokeswoman for BASF declined to comment. But the takeaway was that at least three companies may be vying for the lucrative contract for VW’s new cathode. It’s a remarkable situation, one probably hard to immediately understand if you have not been steeped in batteries. For decades, very little in batteries has worked. Researchers and companies have sufficed with the crumbs of what there was. Now, batteries once ridiculed as improbable — as serious perhaps as near-term human flight to Jupiter — seem near at hand. And not just one battery, but a number of them. There is an excitement to the field that did not exist just a couple of years ago. Frith, the BNEF analyst, has pinned this tweet: “Anyone else in the #batterytwitter community feeling really excited to be part of this global electrification revolution?”
