By Luca Ciferri, Crain News Service
ULSAN, South Korea (July 15, 2014) — To gain economies of scale, BMW A.G. is open to sharing with rival auto makers the electric-vehicle battery cell technology it co-developed with Samsung SDI.
BMW purchasing boss Klaus Draeger said sharing the technology would reduce the cost of the battery cells—the most expensive part of an electric vehicle.
“If Mercedes called us, we would be happy to find a way with Samsung SDI to supply them with battery cells,” he said.
BMW said it plans to increase orders of battery cells from its exclusive supplier Samsung SDI by “at least” 20 to 30 percent in 2016 from its 2014 level.
The supply deal was part of a memorandum of understanding signed between the two companies in Ulsan on July 14 that also included co-development of a next generation of battery cells.
Samsung SDI will increase its supply for the BMW i3 battery powered city car and i8 plug-in hybrid sports coupe and will also supply batteries for future BMW hybrid models starting with the X5 plug-in hybrid, Mr. Draeger said.
BMW sold 5,396 i3 cars in the first half globally out of a total of 1.02 million vehicles it sold during the period. The auto maker said it raised i3 production to 100 units a day starting in April and will raise output by further 40 percent at the end of summer. The i8 launched in Europe last month and will go on sale in the U.S. next month.
BMW began working with Samsung SDI, a subsidiary of South Korea's largest conglomerate, Samsung, on lithium ion battery cells in 2009.
Samsung SDI supplies battery cells to Chrysler Group L.L.C. in the U.S. for the 500e battery powered minicar and to Ferrari for the limited edition LaFerrari hybrid model.
For Samsung SDI, which supplies batteries to Apple, the order builds on the company's plans to expand its automotive business. Its competitors include South Korea's LG Chem, which supplies Renault, and Panasonic, which supplies batteries to Tesla.
Lee Sang Hyun, an analyst at NH Investment & Securities, said the BMW deal will help SDI have greater presence as an electric car battery maker in the U.S. and Europe, where it is relatively less well known compared with other battery suppliers.
Last month, Tesla said it would make hundreds of its EV patents openly available to competitors. CEO Elon Musk wrote, “If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.”
Mr. Musk also cited environmental concerns: “Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis.”
According to Japanese research firm B3, the global market for automotive lithium-ion batteries will increase to $21.3 billion in 2020 from $4.4 billion in 2014.
Samsung SDI builds 600,000 battery cells a month on two production lines in Ulsan. The company will add a third production line by the end of the year to take monthly output to 900,000 battery cells.
A battery normally takes up 30 to 40 percent of an electric vehicle's manufacturing cost, Samsung SDI spokesman David Kim said.
At an event in Ulsan to announce the deal, BMW's Mr. Draeger acknowledged that one of the challenges for battery electric cars is the limited driving range called range anxiety.
“This is why the whole industry is still looking very much at fuel cells because it is not clear what is also happening on the side of the electric infrastructure,” he said, adding that BMW is also doing a research on a fuel cell vehicle system.
BMW plans to further boost purchasing from South Korean suppliers from over 300 million euros ($408.45 million) in value this year.
BMW uses battery cells produced by A123 in the U.S. for hybrid versions of its 3-series and 5-series sedans and for the outgoing X5 SUV hybrid.
Reuters and Bloomberg contributed to this report, which appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.