Nissan is selling its electric vehicle battery manufacturing operations to Chinese venture capital firm GSR.
Automotive Energy Supply Corporation (AESC) will come with a price tag of around one billion dollars, according to reports, and the deal has the potential to create a shock wave through the automotive world. If all goes according to plan, it may also put a cheaper car in your garage.
AESC’s largest manufacturing facility, based next door to Nissan’s Smyrna, Tennessee, factory, is capable of producing lithium ion batteries for up to 200,000 cars per year. Nissan’s primary electric vehicle, the Leaf, accounted for less than ten percent of that capacity in 2016, leaving a glaring inefficiency at a time when Nissan is pouring much of its resources into the coming self-driving and electric vehicle revolution.
The deal will enable AESC, which also maintains a factory in England, to supply carmakers other than Nissan. With American manufacturers currently supplied by Michigan-based LG subsidiary LG Chem, and with Tesla’s gigafactory poised to ramp up production, that leaves European and Chinese carmakers as the most likely targets.
To that end, Sonny Wu, GSR Capital’s chairman, said, “We plan to further invest in R&D, expand existing production capacity in the US, UK and Japan, and also establish new facilities in China and Europe, enabling us to better serve customers around the world.”
A move to supply carmakers in Europe, and especially China, makes sense. European governments are calling for the end of gasoline and diesel-powered vehicles within two decades, while the Chinese government aggressively encourages electric vehicle development today. China is already the world’s largest EV market, and with an explicit target to see 20 percent of all new cars sold in China powered by “new energy,” the gap to the American and European EV market is only going to skyrocket. The increased demand would enable GSR to tap into an economy of scale that Nissan simply cannot match at the present time.
With the large upside clearly visible on the horizon, supply of lithium becomes critical. Demand for the difficult-to-mine resource constantly increases, due to its central role in EV and mobile phone battery production. In July, GSR Capital opened talks to acquire up to a 20 percent stake in one of the world’s largest lithium mines. If the estimated $1.8 billion deal goes through, it would create a synergistic relationship for GSR, combining with AESC’s potential large scale efficiency to enable high-volume, low cost EV batteries without sacrificing quality.
While Chinese supply is clearly on the short-term agenda, the long term ramifications put GSR squarely on the map to compete with the likes of LG Chem and Tesla. Once that competition heats up, the resultant bidding wars to supply the established automakers will result in less expensive sourcing of one of the most cost-intensive components of an EV.
Ultimately, that will mean you’ll have a better and cheaper electric vehicle in your garage.
-- by Aaron Miller