Billions for Batteries (10/10/22)

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• Partnering with Xos: We are electrified to announce Xos as EVDigest's first sponsor! Check out our sponsor headline in today's newsletter covering Xos's solid Q3 deliveries.

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In today's newsletter:⚡ Headline: IRA spurs billions in U.S. battery investments, but Asian battery makers still reign🎙️ Sponsor Feature: Xos stays on course with 88 deliveries in Q3🚨 In Other News: Rivian recall, GM's new board member, Ford EV sales surge and more 🧧 The China Report: NIO Berlin, Tesla Shanghai, Geely's pickup truck, GM China valuation

IRA Spurs $11 billion in U.S. EV Battery Investments, But Asian Battery Makers Still Reign

Since the passage of the Inflation Reduction Act in August, companies have detailed around $11 billion in U.S. EV battery manufacturing investments.

The investments are driven by new electric vehicle tax credits that have local sourcing requirements. The IRA also creates a credits equivalent to $35/kWh of battery cell capacity, $10/kW of battery module capacity, and 10% of the cost of producing a battery mineral.

Last week, Our Next Energy ("ONE") announced plans to spend $1.6 billion to build a battery plant in Michigan and begin production of lithium iron phosphate cells and battery packs in the second half of 2024. By 2027, the plant is expected to produce enough cells annually to support 200,000 EVs.

In an interview with the WSJ, former Apple Car executive and ONE founder and CEO Mujeeb Ijaz, said “the Inflation Reduction Act has literally made [our] phone ring off the hook. We’re seeing a lot of emphasis on the U.S. supply chain and U.S. cell manufacturing.”

Since the IRA's passage, other detailed investments have included:

• China's Gotion's $2.4 billion EV battery cell facility in Big Rapids, Michigan

• Toyota's tripling of its investment at its North Carolina battery factory, from $1.3 billion to $3.8 billion

• Honda and LG Energy's $4.4 billion lithium ion battery plant (location to be determined)

These are just the latest planned investments. Ford and SK's BlueOvalSK JV has been working on an $11.4 billion project in Stanton, Tennessee that will produce both electric trucks and batteries. SK also began production in January of its $2.6 billion Commerce facility in Georgia to supply batteries to Ford and Volkswagen. Meanwhile, GM and LG Energy began production of a $2.3 billion Ohio battery production plant in August for their Ultium Cells JV. Ultium has two other plants planned in Michigan and Tennessee.

But there is still a long ways to go to reduce dependence on Chinese and other Asian suppliers for EV batteries, as the IRA law intends.CATL, BYD, LG Energy and Panasonic together captured 70% of the market in 2022.

And these companies are marching ahead to meet global demand. Just last week, Chinese battery maker CALB became the first battery maker to list in Hong Kong. Currently China's third-largest battery company, CALB hopes to reach the top five in the global battery market within a year. Founded in 2015, CALB has six production sites in China with a projected capacity of 90 GWh in 2023.As Steven LeVine writes in The Electric, China is on track to gain, not lose, EV battery market share. By 2030, for example, Chinese companies are expected to make 87% of the world's cathodes, the nervous system of a lithium-ion battery.

🎙️ Sponsor Feature 🎙️

Xos Delivers 88 Units in Third Quarter 2022

Xos, a maker of Class 5 through Class 8 battery electric trucks and provider of fleet services solutions, delivered 88 units in Q3 of 2022. That’s up 21% over Q2. The units were delivered to customers including Merchants Fleet and FedEx Ground operators across 15 North American cities.The deliveries put Xos on track to achieve its second half of 2022 guidance of 150 to 200 total units delivered.To date, Xos has delivered 123 electric step vans to Merchants Fleet, the fastest-growing fleet management company in North America. Merchants has committed $2.5 billion to EVs and plans to electrify 50% of its mobility portfolio by 2025 and electrify 50% of its fleet portfolio by 2030.Merchants Fleet VP of Fleet Electrification and Sustainability, Hari Nayar, said: “We are excited to continue our partnership with Xos as we move closer to achieving our electrification and sustainability goals.”

🚨 In Other News 🚨

Rivian recalls 13,000 vehicles due to structural defect. Nearly all vehicles delivered to customers were included in a voluntary recall due to the potential improper installation of a fastener that connects the front upper control arm and steering knuckle. The defect, discovered in seven vehicles, can cause loose and vibrating tires, wheel tilt and loss of steering control. For most customers, the fix should take only a few minutes. Last week, Rivian reported Q3 production and delivery figures of 7,683 / 6,584 units (slightly under sell-side consensus) and reiterated its FY target of 25,000 units.

GM adds former Tesla, Lyft Exec to its board as transformation continues. Jonathan McNeil, the former Lyft COO and Tesla President of Global Sales, Delivery and Service who oversaw all customer-facing operations for the EV company, is the latest addition to the GM board. In August, the GM board added Joanne Crevoiserat, CEO of Tapestry (parent company of Coach, Kate Spade and Stuart Weitzman). Last week, GM also announced that Cruise's Arden Hoffman would be the company's new Chief People Officer. The hires at the top are part of CEO Mary Barra's continued transformation of GM as the company pivots to electrification and autonomy and seeks to attract new customers.

Ford EV demand surges as overall sales decline. Ford's September EV sales rose 197.3% year-over-year, gaining 3.1% market share to now hold 7.0% of the U.S. EV market. The company sold 4,691 EVs in September. Since its launch in June, the F-150 Lightning has sold 8,760 units. September sales of the Mach-E increased 47% year-over-year, with 28,089 sold in 2022. Overall vehicle sales, however, disappointed, with September numbers down 9% over last year. 

Ford's F-150 Lightning gets another price hike on rising costs. The price hike is the second in about two months. The 2023 model year will go up by $5,000. The base Lightning Pro now starts at $51,974, up approximately 30% from the original May 2021 price of $39,974. Ford blamed "ongoing supply chain constraints, rising material costs, and other market factors." Prices across the lineup now range from about $59k-$97k, excluding tax and shipping/delivery costs.

GM to boost Bolt production after best quarterly sales ever. GM is increasing production to meet demand after record quarterly sales of the Bolt EV and Bolt EUV, which totaled 14,709 units. The company plans to increase calendar-year production for global markets from 44,000 vehicles in 2022 to more than 70,000 in 2023. In June, GM said it planned to sharply cut prices after a battery recall forced production to stop for six months.

GM Defense to provide Ultium battery technology to Defense Department. The Defense Innovation Unit selected GM Defense to develop a scalable battery platform for use in tactical military vehicles. GM's Ultium architecture (developed through a JV with LG Energy) is a highly flexible platform that can be modified for different vehicle types and body styles. The news follows the July announcement that GM Defense would provide a Hummer EV to the U.S. Army for demonstrations and analysis.

Honda unveils first electric SUV, the 2024 Prologue, using GM Ultium technology. The vehicle is the result of a strategic alliance between Honda and GM announced in 2020. The 2024 Honda Prologue shares the BEV3 platform with the Chevy Blazer EV, and will use GM Ultium batteries and drive motors.

Nissan Ariya EV to hit the U.S. next month, but without tax credits. Without the credits, the Ariya will start at $44,485 with the Engage variant, which has a range of just 216 miles. Nissan is making an $18 billion bet on electrification and has promised to deliver 15 BEV models globally by 2030. That includes a $500 million investment at the company's Canton, Miss. truck plant to build two EV models starting in 2025. Nissan has hinted that it might accelerate U.S. EV production to take advantage of the IRA credits.

Toyota to resume sales of bZ4X EV after finding fix for recall issue. Just two months after its launch, the bZ4X was recalled in June due to a risk of the wheels falling off. Toyota has apparently found a fix, and plans to resume sales of its first mass-produced EV model. For impacted customers, Toyota is throwing in a $5,000 credit, an extended warranty, and free charging at EVgo-owned charging stations through the end of 2024.

Tesla may at last expand original battery Gigafactory in Nevada. The factory has been stuck at 30% of its intended size as both Tesla and Panasonic have focused on optimizing the Gigafactory's current production capacity. The new expansion section is expected to be used for battery cell manufacturing.

Tesla plans to deliver electric Semi to Pepsi in December. Pepsi confirmed a statement by Elon that Tesla will hand over the first Tesla Semis on December 1. Pepsi has reserved 100 Semis and plans to deploy 15 by the end of the year. Anheuser-Busch, Walmart and UPS also have reservations with Tesla. The Semi is expected to be eligible for up to $40,000 in incentives.

VW, BMW and Mercedes all see strong EV demand. U.S. sales of the VW ID.4 hit a new record in Q3, with 6,675 units delivered. Meanwhile, BMW said that demand for luxury EVs is white hot. The company sold 6,900 EVs in the U.S. this year, including more than 4,300 in the third quarter (globally, BMW aims to sell 200,000 EVs this year). In an interview with Jim Cramer, Mercedes-Benz CEO Ola Kallenius said the company is seeing the market turning from ICE to EVs.

Volvo Trucks gets from Amazon for 20 heavy duty EVs, maintains U.S. lead. Volvo Trucks is expected to deliver 20 of its FH Electric heavy duty trucks to Amazon in Germany by the end of the year. In the U.S., Volvo holds a slight lead with about 60 registrations for its Volvo VNR Electric regional trucks.

Faraday Executive Chair resigns citing death threats. Two other board members joined Executive Chair Susan Swenson in stepping down last week following what the company said were death threats and baseless allegations against certain directors. Adam He, CFO of Wanda America Investment Group, was appointed interim Executive Chair.

Uber and Motional sign 10-year robotaxi agreement using Hyundai Ioniq 5. Uber is back in the robotaxi game, this time through a partnership with Motional, a joint venture between Hyundai and Aptiv. The vehicle of choice for Uber and Motional's fleet is Hyundai's Ioniq 5 EV.

🧧 The China Report 🧧

NIO details European expansion, subscription model at Berlin launch event. Friday's event saw the company unveil details of its expansion into Germany, the Netherlands, Denmark and Sweden. Customers will be able to choose from three models: the ET7, EL7 and ET5. Unlike in Norway where it sells vehicles directly, customers in the four countries will only be able to lease vehicles as part of a subscription model, with terms starting from just one month to 60 months (after an uproar this weekend, CEO William Li said the coAll vehicles will come with NIO's full-stack Banyan intelligent system. Deliveries are due to start October 16.

BYD lands order for 100,000 EVs from German rental company SIXT. Meanwhile, other Chinese EV makers are continuing their own expansions into Europe. The purchase agreement with SIXT has BYD delivering vehicles through 2028. The initial purchase will consist of Atto 3 c-segment SUVs, which feature BYD's unique blade batteries. The first shipments are expected to arrive this year.

BYD monthly sales surge to surpass 200,000 units for first time. September sales hit a new high with 201,259 units delivered, up 151% year-over-year and 15% over August. So far this year, the company has sold 1,180,054 new energy vehicles, up 250% over the previous year.

Morgan Stanley's Adam Jonas moves GM China valuation to zero. Jonas zeroed out GM China in both the sum-of-the-parts and normalized EPS valuation. He said that he believed the market may have already done this for us but wanted to align his forecast with the zero NPV GM China valuation "given the domestic competitive EV pressure and stranded ICE assets in the country.

Polestar warns on slow recovery from lockdowns, hikes prices in China. The Volvo Car AB plant in Luqiao, China that produces the Polestar 2 was temporarily stopped or shut entirely for eight weeks in Spring. The company said that it is also scrambling to get enough chips and other essential parts. As a result, Polestar hiked prices in China by up to $4,330. Despite the challenges, Polestar is sticking with its target to deliver 50,000 EVs this year.

Tesla Shanghai September deliveries surpass 83,000 vehicles. Tesla's Shanghai Gigafactory set a new monthly delivery record of 83,135 units according to Cui Dongshu, secretary-general of the China Passenger Car Association. The record follows upgrades made to the factory earlier in the summer.

Geely starts production of its first electric pickup, the RADAR RD6. The RADAR brand, officially launched in July, is focused on electric pickup trucks. Pre-sale for the RADAR RD6 opened on September 30, with an initial price of RMB 180,000 ($25,295). The vehicles are produced in Shandong Province, and adopt a Ni55 battery that can achieve 610 kilometers in range.

Foxconn targets Model Y with the Foxtron Model B. The hatchback will be assembled in China next year. Foxconn is also targeting U.S. production at the Lordstown, Ohio plant it acquired earlier this year starting in 2024. The official reveal is scheduled for October 18.