Manufacturers

In the 4th quarter of 2020, Hyundai recalled 82,000 electric vehicles globally due to battery fire risks at a cost of nearly a billion dollars. General Motors also recalled 69,000 Bolt EVs for battery fire risks. BMW, too, recalled nearly 27,000 plug-in hybrid EVs for potential fire hazards in the battery. And then there are countless anecdotal stories of Tesla vehicles catching fire either on the road or in someone’s garage. This is not a pretty picture.

As EVs increasingly become popular on the road, the safety of lithium-ion batteries becomes a top concern for drivers, car manufacturers, battery makers, insurance companies, firefighters and government regulators. Yet there is no consensus on improving battery safety; the clock is ticking for a possible future disaster.

Drivers are waiting on the automakers to deliver safe vehicles. Car manufacturers largely relied on the battery manufacturers for safety. Battery manufacturers thought their batteries were safe — until they weren’t. Firefighters would rather not see battery fires — they are more difficult to contain than conventional fires. Insurance companies are struggling with the economics of underwriting policies for electric vehicles. Government agencies are globally looking into imposing safety regulations. For example, China’s new 2021 battery safety standards aim to contain a vehicle fire long enough to give the driver 5 minutes to evacuate the EV. But what if the EV is parked in your own garage? How will this new standard protect your home from burning down?

The United Nations Economic Commission for Europe (UNECE) is seeking to harmonize global vehicle battery safety regulations under its Global Technical Regulation No. 20 (GTR 20) initiative. Much work remains ahead — yet it is clear that safety regulations will come some time during this decade.

To be clear, battery fires are rare, occurring at a rate well below 0.1%! But that should be no reason for comfort for these rare events can have catastrophic and traumatic consequences. Safety comes with maturity of the product/technology, concentrated effort across the entire supply chain, investment to reduce the incidence of accidents, along with requisite regulations. As the EV industry grows, it invests primarily in scaling its manufacturing capabilities and pace of product launches…but it is time now to make safety a top global priority.

Lithium-ion batteries can catch fire for a variety of reasons. One common cause of failure is the presence of minute defects in the battery cell itself or within the pack containing 100s or 1,000s of individual cells. These defects are often difficult or uneconomical to screen out during manufacturing. They remain latent leading to a potential disaster months or possibly years downstream.

At a more fundamental level, these minute defects (for example, a manufacturing defect in the anode layer, or a mechanical deformation in the separator) can, under certain operating conditions (for example, cold temperatures), become sites where the lithium ions accumulate to form metallic lithium dendrites. Over time, these dendrites grow within the cell until they create an electric short between the two electrodes leading to a fire. The moment of fire can happen any time: during charging, or while driving, or with the vehicle just parked.

A battery’s failure makes it difficult to assign blame to any one entity in the supply chain. The defect itself is likely to be the responsibility of the battery manufacturer or pack assembly. But the defect alone is not sufficient to cause a fire. The vehicle manufacturer, the choice of battery management system, and the driver’s behavior all play a role that can lead to a catastrophic failure.

The task is to identify and exclude these rare potential problems, not only during the vehicle manufacturing phase but more essentially throughout the life of the vehicle. In other words, the vehicle itself needs to be intelligent to conduct self-diagnostics, continuously, over all the cells in its pack, and predict the probability that the battery may contain a defective cell…at which point, the vehicle can be taken in for closer inspection and preventive maintenance.

That intelligence is squarely in the realm of the battery management system (BMS). These new BMS must be capable to monitoring the integrity of each and every cell in the battery pack, alerting the driver to a potential future hazard, and intervening in advance to mitigate a potential fire. If you are wondering whether such intelligence exists, the answer is an emphatic yes!

At a market capitalization exceeding $700 billion, Tesla enjoys a unique financial position among all auto manufacturers to expand its investments in electric vehicles and infrastructure. Special Purpose Acquisition Companies (SPAC) have taken Fisker, Lordstown Motors, Nikola, Proterra public with many other EV car companies rumored to be in the pipeline. 

These pure EV manufacturers are leveraging their access to capital to expand their market share at the fastest possible pace — they are limited by operational and supply chain challenges, not access to capital. Investors continue to applaud Tesla’s expansion strategy and pace, yet Wall Street remains shy about extending similar enthusiasm to incumbent car makers, for example General Motors and Volkswagen who have announced ambitious plans in electric vehicles. The result is an accelerating race to deliver electric vehicles with increasing performance, affordability, and choice. We are in the midst of deep disruption to the auto industry.

The entire supply chain feels the pressure to adapt to electrification. In particular traditional incumbent system suppliers (Tier-1) and component suppliers (Tier-2) are positioning themselves for the new reality. Electric vehicles contain fewer components than internal combustion engine (ICE) vehicles, and are relatively easier to assemble. Consequently, the automotive supply chain will change materially as the sales of electric vehicles (EV) dominate over the coming decade. As market forecasts show accelerating adoption of EVs, they also show rapidly declining sales of ICE vehicles putting further strain on the automotive supply chain. Expect that several companies in the automotive ecosystem may cease to exist as independent entities in this decade.

The battery itself remains the most expensive item in an electrical vehicle. The battery includes individual energy storage elements called cells that get assembled into a pack. A handful of cell manufacturers dominate the making of cells: LG Energy Solutions (formerly part of LG Chem), Samsung SDI, cATL, SK Innovation, Panasonic, BYD are the most prominent names. Most cells makers also provide the pack assembly, though some auto manufacturers, namely Tesla and the German auto makers, favor building their own packs. This points to the first tension in the supply chain: should the auto manufacturers allow the cell makers to also build the pack? There is a split opinion among auto manufacturers. 

But electric vehicles also require significant electronics and electrical systems making them a very attractive market to the supply chain. These include motors, transmissions, inverters, DC converters, on-board chargers, thermal management systems and, naturally, battery management systems (BMS). Historically, volumes were sufficiently small that the auto makers controlled or manufactured many such systems in house. For example, Tesla, GM, VW control or manufacture their electric motors and transmission systems. Traditional global Tier-1 system suppliers largely sat by the sideline. 

Historically, EV manufacturers recognized the importance of the BMS to the vehicle’s performance and safety leading them to keep significant portions of the BMS in house. But volumes were historically small; competition was virtually limited; software and system intelligence were rudimentary. Some auto makers commissioned the hardware to their suppliers (e.g., Hella built the BMS hardware for Mercedes, and LG built the BMS for GM) but kept control over the software. Once again, the traditional automotive supply chain sat by the sideline.

We now see evidence that the supply chain is changing rapidly. With the accelerating pace of EV adoption, auto makers are beginning to reach out to their traditional supply chain for help. GM was the first to outsource its BMS design and manufacture to Visteon. More Tier-1 suppliers are showing active interest in building more portions of the electric powertrain. Expect more disruption in the coming years as auto makers and Tier-1 suppliers assert their respective roles in building electric vehicles.

The fast pace of innovation is further driving disruption. In awarding the BMS to Visteon, GM saw an innovative wireless BMS solution that could shed significant battery weight by eliminating portions of the wiring harness. Rising vehicle specifications place significant emphasis on innovation in the BMS: longer range (400+ miles), very fast charging (20 minutes or less), long warranties (200,000+ miles) are only examples of this new frontier. Fleet operators, such as electric taxis, are asking for bold battery targets, for example, extended warranties reaching 500,000 miles, raising the bar even higher.

Then comes battery safety! In the fall of 2020, Hyundai recalled 82,000 Kona electric vehicles over risk of battery fires. It will cost Hyundai nearly a billion dollars to replace the batteries in these vehicles. LG Chem supplied the battery cells. Hyundai Mobis, Hyundai’s internal Tier-1 supplier, provided the BMS. LG Chem blamed the BMS. Hyundai blamed LG Chem. Battery safety in electric vehicles was now headline news, and the BMS central to the safety story. This is disruption at its best!

Tesla’s market valuation hit today $225 Billion, more than the valuation of any other auto manufacturer, highlighting the importance of the lithium-ion battery to our economies.

The battery is the product differentiator for electric vehicles, stationary energy storage and many consumer devices. Each category is pushing the specifications of the battery — and they all share similar themes: more charge capacity, faster charging, battery longevity, less weight, less cost, and absolute safety!

You are an entrepreneur. You understand that batteries are powering the future. You think present battery technology falls short of market demands. You invented a new battery technology. You may even have some early prototypes that show some exceptional promise. So you start a new company to commercialize your new technology. Welcome to the Battery Gold Rush, ca. 21st century.

In the first Gold Rush, ca. 1849, many made fortunes, and many others lost riches. The new Battery Gold Rush will not be much different. So what factors should you be thinking about in your pursuit of the battery holy grail?

The break I took from writing is over. I hope many of the readers took the time to read, re-read and digest the insight I shared in my earlier blogs. 

My return theme is around battery safety.  Since 2016, when the Samsung Note 7 became headline news, there have been countless reports of battery safety problems, several of them with catastrophic outcomes. As ominous as they are, these events are covered on the second page, not the first page. But that should not offer any of us any peace of mind….as the old saying goes “where there is smoke, there is fire.”