The Exchanges

Q to start talking at the high level about the state of manufacturing for batteries in the United States, and then get a little bit more into detail on this new battery chemistry that you guys are pioneering. Uh, but starting at the high level, I guess, how would you characterize where we are in terms of the journey to be able to manufacture EV batteries here in the United States?

A I would say we're at the early stages of this. Um, I, I joined the battery industry about 30 years ago, and at that point we were moving all the manufacturing offshore to Japan. And, uh, you know, I, I, um, I ended up leading the effort at Tesla to bring Panasonic along the ride and to bring cell manufacturing back to the US. And at that time, uh, we built the Gigafactory. It was gonna double worldwide production. With the first factory, uh, that we put in place there. And, uh, we were successful with that. Um, that was kind of the first, um, real, uh, deployment of battery manufacturing back to the States with lithium ion cells. And since then, uh, multiple companies have gotten into it, whether it's LG, Samsung, SK, uh, and, uh, the, uh, many of the Chinese as well. So our manufacturing in the U S right now, I would say it's a very early stage. All of us are getting started. Panasonic's got a couple years ahead of us because of that Gigafactory that we put in place. With Ultium cells, we started producing in high volume about two years ago, and we're pretty much the second ones right after that. So we're, we, we've got two factories right now producing. The capacity is roughly 40 gigawatt hours at each factory. So they are significant high volume manufacturers. And we're, we're now at a point where we are the largest, uh, OEM producer of battery cells in North America, uh, wi…

AI assessment note: “I would say we're at the early stages of this.”

Q You mentioned a couple times, cells. Um, I guess, walk me through the value chain for a second, starting, you know, minerals, materials, precursor materials, et cetera, cells, packs. Like, where do we have the most domestic supply in that supply chain, and where do we have the least?

A Yeah, no, that's, uh, it's a good way to look at it, because the, the, what you want to do is you want to manufacture as close as you can to the end Product. The end product being an EV. And so you want to manufacture the battery packs as close to that as possible because it's just very, it's prohibitive to ship. It's, it just gets very expensive, uh, the packaging, the logistics cost of that. Then of course you want to do the module here locally as well. So those are kind of two right from the beginning. You got to do the module and pack, uh, domestically if you're going to be producing EVs domestically. Um, then the cells, the cells ship better than others. So you could actually, uh, manufacture the cells elsewhere. Um, we are manufacturing for all of our vehicles. We've got 12 EVs on the road right now, which is more than any other EV manufacturer. Um, and all of those cells come from our Ultium cells in North America, so we produce all of them domestically. Now, when you go back up the supply chain further, uh, the big materials next are the active materials, the cathode and the anode. The anode right now is almost a hundred percent from China. That's, they, they, they make Uh, graphite, both the artificial and the natural graphite. We're the, um, so that, that comes from China right now. The, um, uh, cathode material, uh, that is a little bit, uh, more diverse in the sense…

AI assessment note: “The anode right now is almost a hundred percent from China.”

Q How do you manufacture LMR? Is it, is it drop in for existing manufacturing? Do you need to stand up entirely new lines, entirely new factories? What does it look like?

A So this is one of the beauties of LMR is that it really piggybacks off all the work that we've done with high nickel. So it's the same manufacturing process. So we'll use the same Ultium factories. The, uh, it's the same electrode manufacturing process. Um, the, the, the packaging is all the same. The, um, uh, formation steps are a little bit different, but again, the equipment's very, is equipment's the same, uh, unless you change the form factor. Um, The, so that's on the, on the sell side, but what's more critical is what you referred to earlier when you're looking more upstream at the material supply, the, the, the supply chain. It's the same players. It's the same, same company that we're buying, the same companies who we're buying the high nickel cathode from can make the LMR cathode as well, and they use the same equipment for it. They're Plenty of capacity to make the new cathode. The, uh, actually, it just, you drop out a couple of steps there, so it makes it easier and cheaper to make. So you're using the same supply chain, using the same materials, you're still getting nickel. The, uh, there's still about one percent or less of cobalt, um, and, and then there's manganese. You need more manganese than before and less nickel. Uh, the anode is still, you're relying on graphite, whether it's artificial or, Or natural graphite. The, so it's, it's really the same supply ch…

AI assessment note: “So it's the same manufacturing process. So we'll use the same Ultium factories.”

Q with LFP. But in the EV market, you know, LFP is being used in EVs too. Um, and there are some ridiculously cheap EVs coming out of China that are all using LFP batteries. So do you see LMR kind of winning that race too, ultimately? Or is it really, should I be thinking about it as like, if you were going to use NMC, Now you should use LMR.

A No, so, so I, I'm glad you're asking this because we want to be real clear. There are markets for each one of these chemistries within the EV market alone. Setting aside the ESS market, if you just look at the EV market, uh, we recognize there is a high range premium market that's out there that will pay for the high nickel. That, that, that market's out. You can imagine a Cadillac, um, the Escalade IQ, uh, Or the Lyric or something like that, where you've got customers that are willing to pay for that premium vehicle and that premium experience. Um, then you've got kind of that middle category that wants good range, but wants to, that, that is real, is more price sensitive. And then you've got the, the, the lower range, which is the LFP. So we, we see a future over the next five years where you're going to have these three chemistries. And, and then you're gonna, you're gonna have some pouch, some prismatic in there. Um, the, generally where we're going is introducing more prismatic form factor cells in the future because it reduces our part count. Uh, just as an example, the prismatic cells on our next generation pack will reduce our, our piece count by over 50% compared to our current pouch cell packs. So prismatic cells, so the form factor also plays a big role in this. So we're looking at three chemistries. Uh, we're looking at multiple suppliers. We're going to be working…

AI assessment note: “There are markets for each one of these chemistries within the EV market alone.”

Q U.S. with regard to tariffs from, on China and all other countries, possibly the existence or non-existence of Inflation Reduction Act-related incentives. Set all that aside, maybe, because I know a lot of the decisions you've been making predate That. What do you think of as the factors that are determinant in whether it does or does not make sense to onshore manufacturing at whatever step in that value chain?

A Yeah, it's a, I mean, it's a theoretical question because we don't live in that world where there's no, uh, there's no tariffs and there's no, uh, uh, incentives, but, but let, let's go to that world, um, because I, I think it's valuable to have that discussion. Um, so if there were no tariffs, no incentives, then I, I think you would go to the place that is the most economical to produce, and where the most economical, economical to produce is generally where the material comes out of the ground. Um, the, uh, it, Depending on how far you go, because the processing, it doesn't make sense to ship rock from Indonesia to the U.S. to do processing here. So you would process it in Indonesia for the first stages. The, um, and, and then what you're going to do is once you get the nickel from that, you're, you're from, from the, from the mountainside there, you're going to get nickel, and then you need to make nickel sulfate. Nickel sulfate is predominantly a liquid You don't really want to transport that, uh, because it's, uh, uh, it's not, you're not, there's, the percent nickel is just too small, so you'll make the precursor material on site there, is what you would normally do, uh, in, in, with rational actors, that's what they would do, um, and then you would most likely ship that precursor material, um, which is a, which is a powder, and you'd send it in these big super sacs, and…

AI assessment note: “you would go to the place that is the most economical to produce”

Q But just to pin you down, can you give me an example of a technical challenge?

A The, one of the, okay, one of the challenges we had was on cycle life, and how, how do we solve for that? Um, because initial cycle life just was not proving to be, uh, to be good enough for what we needed, and so we had to go back and figure out, okay, how are we going to solve this for cycle life? How are we going to solve for, um, Formation time, because formation can take a really long time to do, and formation is kind of the last finishing process that you have to do before you start shipping, uh, shipping cells, before they're ready for usage. And one of the things is, if you have a really extended formation time, then it kills your cost, because you're, everything that adds time in the production process just adds cost. And so some of the, these were some of the issues that had to be dealt with, that our team was able to figure out, okay, let's, uh, uh, Figure out a solution and work with LG and put this into production. So those, those were some of the, two of the issues that we had to deal with.

AI assessment note: “one of the challenges we had was on cycle life”

Q Okay, so then back to the EV battery world, um, why, I mean, LMR, you didn't invent LMR, it's been, uh, attempted for decades, a century, I don't know, you tell me, probably less than a century, but, um, why has it been tough, historically?

A Yeah, this was started probably about 20 years ago when Jeff Dunn's Lab, uh, Dauhausen University in Canada is where they started it, and Argonne uh, really took it to another level, and then it was kind of parked for a long time um,, and I know uh, Professor Don has come back to this uh, a couple of times looking at it um,, but they just haven't been able to solve some of the technical challenges uh, that were there, and our team's been working on this for about a decade uh, overall, and one of the beauties of, uh, uh, of being a EV manufacturer, and now having the lab capabilities, um, that we have at GM now, is we can prove out our own technology and figure out how it's going to work in the vehicle. We've invested over the years in really state-of-the-art equipment for our R&D labs, and then about two years ago, we opened up the, the Wallace Center, which builds large-scale battery cells. So they can do a large, 200 amp hour pouch cell, or prismatic cell, or whatever we need, And we can actually do testing on it in an auto scale size, uh, and, and put it under the test of what our automobiles would see in, in the real world. And so we were able to do this. So we did work in the R and D lab. Then we pushed it up to our Wallace center to build the full scale, uh, cells. We tested it under the variety conditions that it would have for, for a vehicle. And then we worked very clo…

AI assessment note: “they just haven't been able to solve some of the technical challenges”

Q been difficult to overcome technical challenges. I want to dig into it a little bit more just because I feel like, um, battery manufacturing is notoriously hard, but a lot of people just don't like understand what the actual problems you run into are. So can you give me an example? Like what exactly made it hard? To do LMR? Like, what was the technical hurdle you had to overcome?

A So, yeah, batteries, batteries are really, really hard, and I've, I've gone on, so they were kind of starting back in my, my days at Tesla, um, when Elon wanted to get into cell manufacturing, and I, I really argued that, no, we shouldn't do that, uh, argued with him the second time, we shouldn't do that, because he really wanted to get into cell manufacturing, because no one would listen to us and build enough cells for us. And finally, I, I was able to convince them, yeah, let's do it, but let's do it with Panasonic. And so I brought Panasonic along, and Panasonic actually built the cells, uh, in the, um, in the Gigafactory. The, uh, uh, and coming, if you look at what we've done at GM, is they recognized that early on also, that building cells was really hard, and so they partnered with LG. This is before I came here, and it was an excellent, uh, decision to make to partner with somebody that knows, uh, What they're doing. So we have fifty-fifty joint ventures with LG. Now, if you look at another example, Northvolt in Germany, how they, they tried to do it independently, and we, we all see what, what happened in that case. It's really difficult to make cells unless you have that, that expertise. So we were able to make ourselves in the lab. Uh, we were able to overcome some of these technical challenges, uh, that had Uh, uh, had made it difficult to bring this to, to commerc…

AI assessment note: “we were able to overcome some of these technical challenges”