BMW will power its electric vehicles from 2025 with a new cell design, made across 6 factories with help from Chinese battery companies CATL and Eve Energy.
Four of these factories will be situated in Europe and China, while BMW is looking for partners to develop 2 factories in North America now that US EV subsidies will become dependent on US manufacturing and raw material sourcing from the region.
BMW has signaled interest in signing contracts for up to 20GW of battery production at each of these plants, while it doesn’t specify exactly how many batteries it is ordering.
Although it meets the spec, this is NOT the CATL Qilin battery design. That is a flat prismatic design and this is a cylindrical, more traditional shape more like the Tesla 4680 battery, an extension of the established 2170 batteries. The fact that CATL is building them for BMW shows that CATL can pretty much do anything in battery – until now only Tesla, Panasonic and Samsung SDI had a 4680 style battery.
BMW currently uses flat prismatic cells on its current EV designs and says o the new format that it will increase energy density by 20% using more nickel and silicon and less cobalt. BMW says this will increase range by up to 30%.
Ford signed up for the Qilin prismatic battery for cars delivered outside of China, just a few weeks ago. Interestingly CATL already supplies all of Tesla’s batteries for its Shanghai factory for these reasons.
Frank Weber, BMW’s development chief, said that the company is approaching “an enormous technology leap” in the shift from prismatic to cylindrical cells. Which while that may be true for the company, cylindrical cells have had clear advantages for a while now, and CATL is certainly pushing prismatic as the best approach.
He also made comments on possibilities for the lower end of the market, saying that they haven’t ruled out using lithium iron phosphate (LFP) batteries in their lower end vehicles, due to expected cost savings.
BMW’s approach differs significantly to their competitors in Tesla and Volkswagen, in that they are choosing to forego vertical integration and continue to outsource battery production to specialist companies like CATL. BMW still hasn’t announced US battery factories which it controls, this is perhaps because its annual sales are just 2.2 million cars a year, so perhaps it simply has insufficient pull for vertical integration of batteries.
Similarly to the market for internal combustion engine (ICE) vehicles, we don’t expect BMW to compete within the market’s lower price sector yet. It seems to have decided that it does not want to compete with Chinese OEMs like BYD and other European groups like Stellantis that will be competing fiercely on a cost basis.
Vertical integration gives companies significantly more control over their supply chain and improves visibility. This control can give operational efficiencies, but is often best looked at from an environmental, social, and governance (ESG) standpoint.
By owning suppliers, a company has more control over its supply chain and outsourcing such integral components is a gamble both ethically and logistically.
We think that going into uncertain times the more control a company has over its supply chain the better, and BMW isn’t doing anything to remedy that by continuing to outsource its most important components.