Nissan might shift battery cell production to LG Chem in bid to compete with Tesla Model 3

The whole car industry must be able to compete against a 200+ mile range $35,000 MSRP electric car from Tesla Motors, by 2017.  That fact is probably what’s behind today’s news/rumors that Nissan may be shutting down its battery factories and switching to LG Chem as their battery supplier.  In May we learned that Nissan/Infiniti is planning a major refresh of the Leaf in 2017, and introducing a long-awaited Model S competitor by Infiniti, both of which would have a 150-200+ mile electric driving range.

Clearly if the Leaf’s range is not improved, while Tesla matches its price with the Model 3, while offering a 200+ mile electric driving range, the Leaf will die, as will most of the rest of the electric car models.  That’s what’s at stake.

According to a Reuters report, Nissan is in talks with LG Chem about shifting battery cell production from Nissan’s own factories to LG Chem’s.  This would be a major shift for Nissan because the company went to the expense of building battery pack factories in both Tennessee and England, next door to the respective Nissan Leaf factories.

Reuters quotes an unnamed Nissan executive saying “We set out to be a leader in battery manufacturing but it turned out to be less competitive than we’d wanted. We’re still between six months and a year behind LG in price-performance terms.”

What that phrase means is price-per-kilowatt-hour, because the lower the battery price point the lower the price can be for a given car.  Tesla Motors, for example, is claiming the Gigafactory will let them make battery packs at $100 per kilowatt-hour, which is a fraction of the cost other automakers pay.

Nissan and the other automakers have to reach a similar battery pack price to make affordable $30,000ish MSRP electric cars with 200 miles of electric driving range.

Getting back to the Reuters report, it says an internal review (and negotiations) are underway between Renault and Nissan on plans for battery pack production.   Renault wants to move to LG Chem, while Nissan wants to stay with in-house produced battery packs.    Back in 2012, Renault and LG Chem announced a deal where LG Chem would supply battery cells for the Renault ZOE sometime around 2017.

One option under consideration, according to the Reuters report, is for LG Chem to build battery production facilities at one or more of Nissan’s own battery pack factories.

The problem is that Nissan’s battery production capacity is far higher than its sales of electric vehicles.  Nissan’s contract with partner NEC requires the company to buy enough electrodes for the full 220,000 packs a year production capacity, even though sales are at a 67,000 vehicle per year rate.  NEC also has to agree to Nissan-Renault making a deal with LG Chem.

The Reuters report cites evidence that Nissan’s current battery pack cost is around $300 per kilowatt-hour, and that Nissan-Renault executives are targeting a $200 per kilowatt-hour price.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

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