The Trillion Dollar Question
A past, present, and future look at BEV assembly plants and how OEMs will build capacity to meet demand
- By 2030, over 60% of global battery demand will come from passenger BEVs
- In response, BEV manufacturers will have to make decisions with multi-billion dollar implications on whether to build a new BEV plant or convert an existing ICE plant
- Many general and site specific factors are involved in the decision-making process; new BEV plants and ICE-to-BEV conversions are analyzed to gain a better understanding on where future BEV assembly plants will be located
- Building BEV plant capacity globally to 100 million BEVs per year may cost nearly $1 trillion by 2040
Current State
The global battery industry is in a period of rapid growth where global manufacturing capacity of raw materials, specialty chemicals, and batteries themselves may eventually be an order of magnitude larger than they are today. Most of this production is driven by application-specific demand such as stationary storage or consumer electronics, many of which will undergo their own transformational growth in concert with the battery industry.
One part of the battery value chain that is less analyzed in capacity buildout analysis is the assembly of four-wheeled passenger battery-electric vehicles (BEV). This is important as it is, and will continue to be, the largest single source of battery demand. Meeting this demand will require a significant amount of Capital Expenditure (CapEx) to build the necessary BEV production capacity. This application is also somewhat unique in the battery value chain in that it offers the option to retool existing plants instead of building completely new ones.
Assembling a BEV and assembling an ICE, HEV, or PHEV (vehicles with petrol drivetrains) have similarities but are definitely not the same. BEV assembly plants or individual production lines have their own requirements and are typically purpose-built.
In order to better understand how BEV capacity buildout may impact OEM electrification goals, this analysis examined factory portfolio, product considerations, and manufacturing innovations enabled by the EV transition. To supplement this article, a detailed list and map of large passenger vehicle plants across the globe has been developed and made available.
OEM BEV Goals
While there are many differences between assembling an ICE and assembling a BEV, the primary differentiator is the presence or absence of a combustion engine. ICE, HEV, and PHEVs can be assembled in a relatively similar manner since they all contain a combustion powertrain. Adding a traction battery system to these requires relatively little adjustments to the production line.
Building BEVs, however, does require major retooling of existing assembly lines or the construction of a new assembly plant altogether. As a result, nearly every major OEM has announced near-term BEV production goals.
Ratel Consulting LLC analysis
Build/Retool Considerations
Plant Utilization - ICE plants that are idle, operating at low capacity, or are otherwise unprofitable have been, and likely will continue to be, good candidates for conversion to BEV production.
Vendor Cluster - Proximity to cell manufacturers while maintaining access to other key tier-1 suppliers is a crucial factor of consideration.
Subsidies - Federal, state, and local government support have proven to be a major factor in decisions to either convert or build new assembly plants.
Other Factors - Labor unions have played a role in plant conversion decisions, notably at the GM plant in Lansing, MI. The time it takes to begin production also plays a factor in an OEM’s ability to meet market demand, in which case retooled plants typically come on-line faster than a newly built plant.
BEV Assembly Cases
OEMs have provided a number of past, present, and future scenarios to analyze cost, capacity, and other metrics or attributions at a plant level:
Takeaways & Insights
Assumes $8 billion/1M BEV Capacity at 3% annual inflation and $149 billion invested through 2025
- Automotive OEMs will spend almost $1 trillion in order to reach a global electric vehicle production capacity of 100 million passenger vehicles per year.
- The traditional ROI of retooling assembly lines may not apply when retooling an ICE assembly line to produce BEVs as major ICE-ICE retooling may only cost ~25% of ICE-BEV conversion on an annual capacity basis
- The lowest hanging fruit of currently idled plants may all be picked.
- Currently, many global OEMs sell only enough BEVs to economically justify the operation of a single large BEV plant, where the plant produces profitable models at a high utilization rate.
- New BEV assembly technologies and systems like Tesla’s ‘Unboxed Method’ may help reduce costs through enhanced production efficiency.
