EV Battery Manufacturers: Innovation and Unit Cost

Do the major battery manufacturers, LG Chem, Panasonic compete purely on processes, scale and minimising cost?

Yeah, but the cost has to be coming from innovation, in other words, the materials, improvement, because improving the cathode material — in particular, the energy density — you get a double benefit. You need less material for the same amount of kilowatt/hours, which is ultimately what matters. And yet, the cost per kilogram of material goes down because of lowering cobalt or whatever, so that significant level of R&D, which then drives this innovation in materials, is going to be another key factor in driving the advantage, along with economies of scale.

How did you think about creating a culture of innovation in LG Chem?

It’s very strong. The people have recognised that. We have close to a couple of thousand engineers doing R&D in all aspects of batteries. Of course, improving the conventional materials, looking at newer technologies like solid-state, as well as manufacturing processes and so forth.

What was the biggest challenge you faced in driving innovation?

Well, the waterfront is pretty broad, so you had to figure out where you were going to try and focus, and secondly is the business model. LG, in some sense, was lucky because there was existing business like the petrol chemicals business and others that were generating enough revenue that would allow you to fund some of that R&D, whereas a start-up would have a real tough time surviving. That’s why these barriers to entry are pretty high, and that’s why there’s not going to be that many big battery players — four or five, potentially — but it’s going to be a relatively small number because of all of these factors. But the innovation was recognised as not just something nice to have but a critical element for survival.

How did you organise the business? Obviously, you’ve got a huge number of employees, huge processes, huge scale. What is the toughest part about organising that institution to really drive innovation?

Some of that was done in Korea and, in fact, a large part of the development for the cell itself came from Korea, so one of the things we tried to do is not have duplicate work. Some of the work I was doing in the US was focusing more on the pack because better talent was available. That’s more of what I would call traditional automotive industry expertise and mechanical structures, whereas things related to chemistry was done more in Korea because that’s partly the core business for LG Chem, the materials expertise, and they could easily borrow from other parts of specialised talent that you may not need on a full-time basis. So, it was just trying to figure out how it should be structured or partitioned between Korea and the US.