The Electric is a new premium service, from Steve LeVine and The Information, focused on one of the most important and least-covered groupings of industries on the planet—next-generation batteries, electric vehicles and autonomous driving—and how they will shape the future of business, cities, wealth and geopolitics. We would appreciate any feedback as we develop the publication. The next step will be a paid beta version, for which we’re making 100 seats available. If you’re interested, please click here or email [email protected].
Good evening and welcome to the first issue of The Electric!
Around 1920, two long-gestating technologies that had only been within reach of the rich suddenly came down in price, captured the imagination of everyone else and set in motion an economic boom. They were the humble home appliance—the toaster, washing machine, stove, vacuum cleaner and more, attached to an electric plug—and the private automobile. At once, the dual age of domestic convenience and road travel had begun.
A century later, electricity and the automobile are poised to trigger another bonanza. This time, the two technologies come packaged together. No one can project with certainty how the era will play out, but mainstream forecasters expect global electric vehicle sales to be trillions of dollars a year by the middle of the decade if affordable models are released as planned. EVs will bring colossal fortunes to the winners and abject suffering or ruin for incumbents and investors who make the wrong bets. Not all legacy automakers will survive. Suppliers to the combustion car industry, oil companies and petro states that fail to adapt could plunge into a long decline. Cities and neighborhoods will experience disorder, too. The demise of combustion engines and the rise of EVs means the loss of thousands of jobs dependent on the old order and the gain of others, and countless businesses will shutter while other are launched.
The new age of electrification in all its dimensions is the topic of this publication. In weekly deep dives, news alerts and live briefings with people who are making the transformation possible, we will navigate everything from the atomic chemistry of batteries to the geopolitics that will influence the upheaval.
Lower down, you will find a road map of the broad themes that I think will govern the decade ahead.
As with most periods of intense change throughout history, what appears to be a fixed narrative—in this case, around electrification—is subject to change. For instance, China for the last decade has sought to capture the new industries of electric, tech-infused mobility. First, China aimed to displace Japan and South Korea, until recently the two largest lithium-ion battery makers on the planet, by locking up global supplies of cobalt and nickel, two of the most important metals for lithium-ion batteries. Chinese companies now control eight of the 14 largest cobalt mines in the Democratic Republic of Congo, which holds two-thirds of the world’s supply of the metal, and they are the largest producers (and consumers) of nickel on the planet. U.S. and European auto and battery companies and policymakers have agonized over the prospect of China controlling critical metals. They remember how the West suffered in the 1970s when OPEC controlled oil supplies.
Yet a vastly underappreciated trend can shift the balance of power: One big automaker after another—Volkswagen, Ford and Tesla—has said in recent weeks that they no longer plan to use traditional nickel-manganese-cobalt (NMC) or nickel-manganese-aluminum (NCA) batteries for all their vehicles. Instead, many of them plan to use batteries with cheaper, more plentiful metals and elements such as iron, phosphate and manganese. This Western move toward alternative raw materials could become a stampede. And if it does, it could upset China’s industrial calculus, at least temporarily. Whether the Americans or Europeans will be bold and nimble enough to capitalize on this opening by building the capacity required to make their own iron- and manganese-based batteries is another matter. Either way, the conventional wisdom that China holds an overwhelming advantage in raw battery materials is likely to experience at least a pause.
Watching this space, I have found it best to take the long view, since batteries and EVs are not new things: The battery was invented by Alessandro Volta in 1799, and the first commercial electric car arrived a century later, in 1897. The batteries stored insufficient energy for early EVs to go very far, so the rival internal combustion vehicle, once shorn of the maddening crank starter, became dominant. When Tesla introduced the all-electric Roadster in 2008, the cost of the battery drove the car’s price to as much as $170,000, vastly limiting its appeal.
But over the last two years, and especially the past 10 months, the battery limitations that had held back EVs for centuries abruptly changed: Small, incremental improvements cut battery production costs 90% from a decade ago. The cost to produce a lithium-ion battery is now excruciatingly close to $100 per kilowatt-hour, a long-sought Holy Grail and a level at which it had been thought EVs would reach cost parity with combustion vehicles. All sorts of added meanings have been attached to this imminent milestone: Mobility strategists and thinkers have painted a portrait of until-now hesitant buyers—suddenly noticing that EVs have become affordable and fast-charging infrastructure exists—purchasing EVs in droves.
‘After Battery Day’
But the atmosphere of expectation around the $100/kWh inflection point only partly explains today’s frenzy around batteries and EVs. The other big trigger happened on Sept. 22, 2020, a Tuesday on which the world of batteries sharply changed. In what seems to have been the first-ever attempt by anyone in technology, autos or any industry to hold an unabashedly rock concert–style event devoted solely to the humble battery, Tesla CEO Elon Musk walked on a stage at the company’s main factory in Fremont, Calif., in a black T-shirt and microphone and began to hold forth on what he called, simply, “Battery Day.” As a livestreaming audience watched and Tesla obsessives sat offstage in a parking lot full of cars, Musk let his battery geekery hang out, dissecting metals, solvents, dry coatings, tabs, electrical path lengths, power-to-weight ratios, gigawatt-hours, terawatt-hours, kilowatt-hours, die-cast aluminum, single-piece casting, range, power, density, wastewater, nickel supplies and the upside of 46-millimeter-by-80-millimeter cylindrical cells. He wowed battery experts, who could see that Musk knew what he was talking about. As a climax, he also promised that he would cut the cost of Tesla batteries 56% and increase their range 54% within three years, all toward the epic goal of producing a $25,000 EV for the mainstream buying public.
The event was, for the battery and EV industries, a sensation. Musk is forever late in launching new Tesla vehicles and his company faces tremendous quality issues. But today, the EV world is divided into two eras: “before Battery Day” and “after Battery Day.” In a 98-minute tour de force, Musk seemed to single-handedly catapult the coolness quotient of the battery to that of the EV itself and force rival companies to embrace their own inner cathode. The decibel level around batteries soared as the most serious players in EVs conspicuously attempted to replicate Musk’s performance: Volkswagen held “Power Day” focusing on its battery chops. Lithium-metal-battery darling QuantumScape came out of stealth mode with a “Solid State Battery Showcase.” A mania for battery and EV special purpose acquisition companies broke out—almost two dozen SPACs, collectively valued at tens of billions of dollars, were announced over the subsequent months. Battery events kept coming, along with announcements of a planned rollout of some 100 new EV models by 2025: General Motors promoted its Ultium Battery, and longtime laggard Ford its Ion Boost batteries. In just the last couple of weeks, Renault held “Eways,” Nio of China had “Power Day,” and Stellantis put on “EV Day.”
Are battery and EV stocks experiencing a bubble? Almost certainly. Just as legacy automakers are under existential threat, so are the new players. The coming decade will be brutally hard for everyone. The share prices of electric pickup truck startups Lordstown Motors and Nikola have both plunged on serious doubts about their longevity. But should they be trading at anything above zero when—competing with the forthcoming electric Ford F-150, Tesla’s Cybertruck and the Rivian R1T pickup—there is little chance that either will become a going, profitable concern? Beijing is inviting doubts about overseas-listed Chinese EV and battery companies because of its crackdown on U.S.-traded ride-hailing firm Didi Global. Since the crackdown began, the U.S.-based shares of EV makers Nio, Li Auto and Xpeng have all dipped.
What’s next? Over the coming months and years, five emerging trends will influence the industry:
1. Low-cost batteries will alter the status quo.
Until recently, workhorse NMC and NCA batteries were poised to be the beating heart of almost every EV on the planet. But, in one of the least-appreciated and potentially most consequential shifts in the field, key automakers have embraced lithium-iron-phosphate (LFP) batteries, whose cost has already fallen below $80/kWh, according to BloombergNEF. Tesla, Volkswagen, Ford and Stellantis have said they will use LFP for their least-expensive, lowest-end vehicles. For the same cost-saving reason, VW and Stellantis are also embracing high-manganese batteries. Next, look for LFP and high-manganese to encroach on the middle range of EVs, right up to the edge of the luxury and sports car categories. That will shake up billions of dollars of investments built on the assumption of NMC and NCA dominance.
At the moment, LFP is stigmatized by the perception that its comparatively low energy density means it can’t power an EV for 300 miles per charge—a key benchmark. On Thursday, though, Tesla announced it is now using LFP in its China-produced Model Y compact SUV, which it said could run 326 miles per charge. In other words, LFP not only costs considerably less than NMC and NCA but promises a range that I would argue will satisfy most consumers. One wonders whether LFP won’t also undermine the billions of dollars of investments most automakers have made in next-generation silicon and metallic lithium anodes. As Chao-Yang Wang, a prominent LFP researcher at Penn State, told me, “Range anxiety can be completely eliminated by 300 miles per charge.”
2. China is far ahead but has shot itself in the foot, giving the West an opening.
Last week, Kyle Bass, a prominent hedge fund manager, told CNN that by cracking down on Didi Global, China was communicating “a big FU to the United States” because the move hurt Americans who had invested in the company’s initial public offering at the start of the month. But for Western EV and battery makers, the Chinese action was a gift. Beijing appears simply to have been trying to impose some control over potentially wayward companies, but it has now cast doubt on the stock credibility of every Chinese tech firm whose shares are listed outside of China, including EV juggernauts BYD, Nio, Li Auto and Xpeng, not to mention several others that had hoped to go public in the West. That means more investment dollars should be available for U.S., European and other non-Chinese battery and EV companies.
One possible beneficiary is Freyr, a Norwegian battery maker, which listed its shares on the New York Stock Exchange on Thursday (it finished the week down 6.8% and valued at $339 million). Freyr is relying on technology licensed from Boston-based 24M, which replaces the standard method of battery manufacture with a system it calls “semi-solid.” Freyr says it has thereby cut costs dramatically by eliminating numerous current procedures in cell and pack manufacturing. Its method differs fundamentally from the process used in China, where some three-quarters of EV batteries are produced. A bet on Freyr, which is building a factory in Norway, is a wager that the U.S. and Europe can build their own battery manufacturing industries independent of Chinese, South Korean or Japanese technology. It’s not a long shot.
3. For EVs to take off, battery prices need to be lower than everyone thought.
Most startup battery and EV investments to date are likely to see no revenue until the middle or second half of the decade. One much-overlooked reason is that, at least publicly, the industry has yet to understand a fairly substantial shift in terms of how far the price of a battery needs to fall for EVs to achieve price parity with an average combustion vehicle. For the past decade, most people in the field have believed that price point was $100/kWh. But that was just a stab in the dark, an educated guess made long before EVs started to reach the mainstream. Now the growing consensus, as voiced at the Department of Energy and research firms like BNEF, is that parity will happen at around $60/kWh. That pushes the surge in EV sales a little further into the future and means everyone is going to have to be a bit more patient.
4. Legacy automakers are at risk from the Osborne Effect.
As motorists become cognizant of the inevitable arrival of cheaper EVs, at least some will become nervous about the resale value of combustion engines. They may fear getting stuck with obsolete gasoline-guzzling vehicles and abandon them altogether. That is, while the transition to EVs may happen later than thought, legacy automakers could nonetheless suffer outsize losses sooner.
For the cool kids, the term for this phenomenon is the Osborne Effect. The name refers to Adam Osborne, an early successful maker of personal computers. In 1983, Osborne hubristically announced his next planned PC—more than a year before he could actually deliver it. Meanwhile, his customers, deciding to wait for the more up-to-date version, stopped buying his current product. Later that year, Osborne was forced into bankruptcy.
In the current context, one can easily imagine millions of new gasoline-run vehicles going unsold as people wait to take a look at the dozens of affordable EVs scheduled to arrive in 2024 or 2025, putting legacy automakers in a cash crisis.
5. Fast charging will be a decade-long obsession.
Early adopters of EVs have a mantra about the availability of charging, which is that it’s not an issue—they just plug in when they are home and otherwise don’t worry about their battery. The installation of technology to allow an EV to charge in 15 minutes or so? Totally unnecessary except for the rare long trip, like New York to Miami. For ordinary people living on the actual planet, though, the ability to charge almost anywhere, quickly, is nonnegotiable. They want the equivalent of the no-hassle gas station experience to which they have become accustomed. The good news is that both battery developers and automakers have gotten the message and are obsessed with systems that enable 100 to 200 miles of charge in 10 to 20 minutes.
The shortage right now is in plans and funding to build fast-charging stations, which can cost tens of thousands of dollars per charger. It’s one of the surest investments in the industry.
From the launch of Tesla’s Roadster until around 2023 or 2024, it will have taken a decade and a half of tinkering to achieve truly affordable, mass-market EVs. From there, it will require at least another half a decade to know who are the biggest winners and losers of the age. Even Tesla’s vaunted position is not guaranteed. Throughout, an overriding question will be whether ordinary people, given the price-agnostic choice of electric or combustion, will choose EVs.
As of now, Europe is requiring automakers to put millions of EVs on the road by the end of the decade. China, too, is pushing EVs into consumer hands through incentives and strict zero-emissions rules. American policy, conversely, has been largely hands-off, leaving it to GM, Ford and startups to shape the U.S. response. So far, the legacy American champions have been far less aggressive than their rivals abroad. Though GM and Ford have announced more and more capital investment in EVs, they are still conservative when it comes to the construction of essential battery factories and charging infrastructure, areas in which the Chinese and Europeans have not held back.
GM and Ford seem intent on squeezing the last profit out of combustion. That’s why Tesla and a clutch of startups are—for now, at least—the vanguard of the American campaign to own the battery and EV age. The coming five to eight years will tell whether they did enough.
This is a free pilot version of The Electric, a new premium publication for institutions and professionals who need essential intel on the battery and EV industries. During the pilot, subscriptions will be available for a special price of $2,000 a year or $200 a month—and will include deep-dive reports, special alerts, breaking news analysis, virtual briefings and more. To subscribe at the discounted price and secure your spot in our paid beta, please click here or email [email protected]. Steve welcomes your comments and suggestions. Email him at [email protected].
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About Steve LeVine
Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and the Great Battery War, and is on Twitter @stevelevine