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Mercedes-Benz Joining Stellantis in Battery Manufacturing Spells Bad News for Tesla

The German and French automotive industries have almost always been rivals, but in recent years they have been become even better friends.
Things like Daimler’s continuing cahoots with Renault regarding technology or the PSA Group buyout of Opel have obviously transformed the appearance of that rivalry into more of a harmonious competition, or even collaboration.

With the way that the industry itself is fast approaching the moment when every carmaker will need to revalue its products, and whether they will switch 100 percent to EVs or perish, one of the biggest hurdles it might encounter is represented by suppliers.

As you all know, while some smaller car brands do everything in-house, most of the larger ones depend on various parts suppliers to essentially put their vehicles together.

For example, there aren’t any carmakers that make their own microprocessors, which is why the global chip shortage has affected so many of them, and that’s only part of the problem.

In the looming context of electric cars appearing like mushrooms after the rain everywhere, battery production capacity is expected to begin to pose an issue as well.

According to a report by Rystad Energy, an independent energy research and business intelligence company from Norway, lithium-ion battery production capacity should be increased tenfold over the until 2030 to meet the fast-emerging demand.

To put things into perspective, the entire world’s current li-ion battery manufacturing capacity sits at just under 1TWh, with Tesla, one of the biggest if not the biggest proponents of electric cars (since that is the only thing they make) currently having a production volume of only 50GWh.

Truth be told, Tesla did announce that it plans to increase that capacity to no less than 3TWh by 2030, once it completes all its Giga Factories expansion plan, which will need a LOT of investments, somewhere in the vicinity of hundreds of billions of dollars.

Despite being an American company that has established a firm foothold on the U.S. EV market thanks in part to its massive network of Supercharger stations, Tesla has always had a vision of going global.

For example, Europe’s Tesla Supercharger network already has six-times more charging stalls than its biggest local competitor, Ionity, which has expansion plans that are evolving at a much lower rate despite being backed by a consortium of established carmakers like BMW, Mercedes-Benz, the Volkswagen Group and Hyundai-Kia.

Getting back to the matter at hand though, which is battery production capacity, it seems like Mercedes-Benz and Stellantis, which is comprised by French and American car companies, just announced the beginning of a cooperation that only spells bad news for Tesla, since it might close that competition or even swing it in the Europeans’ favor.

Keep in mind I’m only talking about the Old Continent though, where Tesla’s only battery making facility is currently being built near Berlin.

Emerging as a massive player in this area, a project that was initially started by TotalEnergies and former Group PSA in 2019 has just welcomed Mercedes-Benz on board, who will become equal shareholders in the recently established Automotive Cells Company (ACC), together with Stellantis and TotalEnergies.

Each brand has a 33 percent stake in ACC, whose objective is to reach at least 120 Gigawatt hours of cell capacity by the end of the decade, which is more than two times Tesla’s current global production capability.

So, why is it bad news for Tesla considering they are officially on the road to no less than 3TWh by the end of the same period, you ask?

Well, it’s rather simple, actually. Unlike Tesla, which is still treading a fine line between investments and net profit, traditional carmakers have yet to fully open their coffers in the direction of EV investments, meaning it’s plausible that they will be less affected by a probable battery production capacity issue in the future.

Tesla has been living on borrowed time for quite a while, and their plans are definitely more optimistic than those of established carmakers, but what it probably doesn’t quite take into account is the actual cost involved.

According to the same Rystad Energy report, Tesla will need to spend an extra $230 billion (insert Dr Evil face) on expanding the number and capacity of Giga Factories all over the world over the next 9 years, money that it doesn’t have.

Huge players like Mercedes-Benz, Stellantis, the Volkswagen Group and maybe even BMW have appeared quite dormant while Tesla established a firm footing on the European market in the last couple of years, but the roles could reverse sooner than you think.

 
 
 
 
 

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