As the world slowly recovers from the supply chain crisis, there is good news to report from the automotive industry. Despite factory production constraints and a shortage of semiconductors, GM beat expectations and reported a record fourth-quarter profit. The improvement came from increasing inventory of its biggest money makers, pickups, and SUVs, as parts constrictions eased. The next challenge manufacturers are facing is to lock in battery resources to support the demand for electric vehicles in the coming years.
As gas prices stay inconsistent, consumers are looking at electric vehicles now more than ever. Production will need to ramp up over the next dozen years, as California, New York, Massachusetts, and other states have authorized the elimination of the sale of gasoline-powered cars, by 2035.
GM’s CFO, Paul Jacobson, said in a Wall Street Journal article that the company “isn’t planning to alter its EV pricing” despite consumer demands and that “this is the breakout year.”
EV production will be dependent on the availability of essential parts. Lithium-ion batteries are essential for EVs, and several automakers have revealed plans to build new battery manufacturing plants.
However, GM’s battery partner LG Energy Solutions has reportedly bowed out of the fourth battery cell-making facility over rapid timeline concerns. While the joint venture is going strong with the three existing plants, a number of separate issues culminated in the decision not to build the fourth plant such as:
- GM wants to ramp up EV volume much faster than its LGES partner.
- GM’s rapid rise in volume demands a ramp-up in battery cell output from all three plants that’s much faster than LGES is comfortable providing.
- Recall of all 143,000 Chevrolet Bolt EVs, due to a total of 16 confirmed battery fires.
GM stated that it was speaking with other potential partners with which it would build the fourth cell production facility, although it declined to name any of them. The production of batteries and the supply chain management of the essential part will determine the success of GM’s 2023 EV goals as other manufacturers are quickly catching on and following suit. Stay tuned to future blog posts for more information on supply chain trends, challenges, and opportunities.