Around the tracks: Automakers race to secure EV battery supplies

US automakers have intensified their cooperation with producers of both batteries and battery raw materials.

South Korean battery makers have widened their plans to establish plants in the US. South Korea's LG Energy Solution signed joint agreements with General Motors under their Ultium Cells joint venture and with Japan's Honda Motor for a battery plant – both in Ohio. It also signed an agreement with Ford Motor Company for a battery plant in Ankara, Turkey.

Ford itself has ventured further afield by investing in Indonesia to secure nickel for EV batteries.

Although late in the game, Southeast Asia has started developing its electric vehicle markets, with Chinese companies such Zhejiang Geely Holding Group Co. Ltd. hoping to create a new energy vehicle hub in Malaysia.

Amid the signings, lithium, a vital component of secondary batteries, has seen global prices falling, led by weaker Chinese domestic lithium prices.

As for combustion engine vehicles, any annual production increases could be a result of steep falls posted in the year-ago corresponding periods.

Forward gear: Pent-up demand remains while global markets seek rebalance

Reverse gear: Supply chain challenges, higher steel costs

Outlook

Supply chain challenges will affect most global automakers while a slowdown in economic growth and higher inflation will cause consumers to be choosy in what they buy.

Although there are vehicle backlogs to clear, they are likely to get smaller as inflation and interest rates cause car buyers to reconsider vehicle purchases as prices increase.

There is a market consensus that inflation has peaked but will ease markedly in 2023 and 2024.

Moreover, COVID-19 is still around and the risks of new waves and mutations remain even though restrictions have been mostly lifted around the world.

An EV price war could favor buyers while fresh financial crises could emerge as it did with Silicon Valley Bank.

Steelmakers are intent on raising their product prices as costs increase, so while a steel-heavy vehicle won't increase much in weight, its price will.

US

February sales stood at 14.9 million units on a seasonally adjusted annual rate up 8.6% year on year, according to the National Automobile Dealers Association, adding that it was "...likely aided by higher inventory and incentive spending."

NADA believes "that with more inventory available, new light-vehicle sales will increase in 2023. Our full-year forecast is 14.6 million units."

S&P Global Mobility projected a 2023 sales volume of 14.9 million units in the US, an 8% increase from the 2022 tally.

"Auto sales will be supported by advancing production levels, along with reports of sustained retail order books, recovering stock of vehicles, and improved fleet demand," S&P Global Mobility said March 23.

The Inflation Reduction Act is expected to attract more interest in establishing battery plants in the US and the supply chains to feed them. However, higher material costs, especially for steel plate, will mean a new vehicle will be more expensive.

EU

New passenger car registration in the EU rose 11.5% year on year and 5.6% month on month to 802,763 units in February, data published by the European Automobile Manufacturers Association, or ACEA, showed. But the group emphasized in a press note released on March 21 the low base of comparison as the car industry was hit by a semiconductor shortage crisis at the beginning of 2022.

Over January-February, new car registrations rose 11.4% year on year to almost 1.6 million units. In February, the number of battery electric and hybrid cars registered in the EU also rose, representing 12.1% and 25.5% of the market share, respectively, ACEA reported. But petrol cars were the main choice for newly registered cars in the EU with a market share of 36.9%.

• Supply of semiconductor chips seen improving
• Growth in 2023 due to lower comparison in 2022
• Northern European CRC prices stood at about $1,044/mt at the end of March, up sharply from $811.97/mt at the beginning of January

CHINA

Passenger vehicle sales were lower in the first three months of 2023 due to stalled household income. As a result, steel demand from the passenger car and home appliance sectors is unlikely to see much improvement either at least in the first half of 2023, several sources said.

A slowdown in property investments and export contraction in manufactured goods would continue to weigh on household income this year, the sources added.

• Regional governments provide incentives to boost auto industry
• Local auto industry affected by high inventories
• Auto buying could fall as consumers prefer to increase savings

INDIA

For the year ended March 31, sales of passenger vehicles stood at a record high of 3.6 million units, up 23% year on year, Federation of Automobile Dealers Associations' data showed April 4, citing the first full year without the impact of COVID-19.

FADA said FY 2023-2024 "will be a year of consolidation for the India auto retail industry with an overall single digit growth over [the] previous year."

It attributed the single digit rise to a higher comparative year, "inflationary pressures, routine price hikes, and regulatory changes."

• India eyes discounted Russian crude as counter to inflation
• Higher imports of Russian flat steel
• Domestic HRC EXW Mumbai prices increased steadily to about $723.52/mt by end-March from $681.66/mt at the start of January