Why the Battery Airbus remained a microlight

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Emmanuel Macron's visit to Douai the day after the regional elections celebrated the construction of an Envision 'gigafactory' on the Renault site. This project is a sign of the French government's acceptance of the reduction of its battery Airbus project to a mere Stellantis-Total project, as had been predicted for many months. Beyond the political disappointment, this sequence says a lot about the nature of the competitive game in the industry and the place that the question of batteries will now occupy. If we understand it better, it seems quite clear that the project was stillborn.

Few commentators have emphasised the somewhat surprising nature of Emmanuel Macron's visit to Douai: he came to congratulate himself and Renault on the forthcoming establishment of an Envision 'gigafactory' within the walls of Renault Douai.
 
However, for all those who have followed the evolution of the dossier, this partnership embodies the reiterated refusal of Renault and its managers to subscribe to the famous strategy of the 'battery Airbus'. The latter, which was supposed to rally many EU countries and partner companies, was announced with great fanfare by Bruno Le Maire, Peter Altmaier and Maros Sefcovic, European Commissioner for Energy, and was only made up of PSA and Saft in May 2019, when, after a year and a half of negotiations, its creation was announced.
 
If it did not appear to be purely Franco-French and allowed the presence of P. Altmaier and the granting of European or national aid under the heading of PIIEC (Important Projects of Common Economic Interest), it was only because, having bought Opel in 2017 and having accepted that in the long term two 24 GWh "gigafactories" would be created, one in Douvrin, the other in Kaiserslautern, PSA gave this sort of bi-national guarantee.
This seemed a little thin to merit the qualification of the Airbus of the battery, but the politician believed in it and considered that it was urgent to announce it. At the time, Mr Altmaier said that he had "35 positive responses, including from major car manufacturers" to enable the consortium to expand. B. Le Maire said that "other Member States" of the European Union had "already expressed their wish to join the project" and even ventured to give the names of Italy, Belgium, Poland, Austria and Finland.
 
With the crisis, Renault's difficulties, the health crisis, the EMP, the permanent evocation by J.-D. Senard of the case of the tyre and the place taken in a few years by the Chinese manufacturers on this market, Bruno Le Maire was certainly hoping at the time to rally Renault and possibly force the hand of its managers who were not very eager to find themselves stewarts in a device which had been conceived by others with a know-how of which they were not sure, as they were not discovering the dossier but had already devoted themselves to it for more than ten years.
 
The question of batteries and the choice of suppliers in this field are problems that Renault and Nissan have faced since the end of the 2000s. Nissan, as you will recall, had already decided in 2007 to try to move towards partial internalisation and had formed an 'automotive' partnership with NEC via the creation of a JV called AESC. It was this JV that supplied the batteries for the Leaf. Renault should have used AESC solutions for Zoé and Kangoo K-ZE. Renault engineers did not find them convincing enough and turned to the Korean LG. In 2017, Nissan and NEC sold their joint subsidiary and admitted that they had not managed to reduce the cost of manufacturing batteries through economies of scale.  Envision bought the business and retained the entity and part of the Japanese teams involved.
 

Renault's view, which is shared by most manufacturers, including Stellantis, is that the battery issue is too crucial for the future of a manufacturer today to put all its eggs in the same basket on the one hand and make common cause with its competitors on the other. 

On the first point, the question of the 'quality/price ratio' of the cells proposed by each of the major global players, or even by more marginal but convincing players, is not a standard question for buyers. It is the question that engineering departments must ask themselves as soon as they develop a vehicle project. At Renault, depending on whether it is a question of making Zoé, Twizy, Twingo, Spring or the R5 or the Megane, the equations are not the same and it is necessary to be able, before freezing a choice, to make a wide enough tour of the track to choose the right chemistry and the right partner to conceive the adaptations for a project. To date, according to the explanations given last week by Luca de Meo and his teams and explained by Florence Lagarde on Thursday, depending on whether we are thinking of the development of the R5, the e-Megane or future rather top-of-the-range models that Renault could propose, we will favour an NMC (nickel manganese cobalt) solution with Envision or high performance solutions adapted to vehicles in the C segment and above because they are more centred on autonomy and charging speed with Verkor or we will remain with LG to rapidly develop e-Megane.
 
By developing these multiple partnerships according to range levels and periods, a manufacturer gives itself the means to be able to exercise a rather broad portfolio of options in terms of battery technologies: in financial terms, it would seem that this allows the manufacturer to remain in a rather liquid position. Obviously, in industrial as in financial terms, choosing liquidity is potentially synonymous with giving up profitability. In the exploration phase, where everyone must accumulate knowledge in order to eventually take greater risks, it is nevertheless the choice that dominates.
 
This is all the more justified as everyone has understood that battery electrics are becoming the standard in the global automotive industry and that, in this context, in order to make real differences with the competition, mastery of this battery link in the value chain is becoming decisive. 
 
This is true at the industrial level and/or in terms of supply and cost control: representing 30 to 40% of the manufacturing cost price, the battery and the trajectory that each manufacturer, together with its suppliers, will be able to give to its costs will be at the heart of industrial strategies. This is also true, of course, in terms of product policies: autonomy and recharging speed in different configurations are already the sinews of a commercial war in the electric vehicle sector that is only just beginning. In order to conduct this war, the manufacturers who have had to rush into it rely heavily for the time being on multiple external partners.
At the same time, they are developing their own skills and in the future will internalise a growing part of the R&D. Indeed, even if the external partners can offer a manufacturer exclusivity for a time on a technology developed with and/or for him, intrinsically, a supplier has the vocation to try to promote his technology to all.
 
Thus, if the battery Airbus appears a posteriori, in 2021, to be a false good idea, it is mainly because the pooling of research and production resources is no doubt quite suitable for the so-called 'pre-competitive' or exploratory phases.
As soon as we enter the real competitive battle and it is a question of the heart of the game, both in terms of production and sales, to imagine that manufacturers belonging to such a narrow oligopoly as the automobile industry could make common cause is rather naive.
From the point of view of public research policy, it is very likely that the "incentive scheme" that will allow the fastest progress in technology is that of competition rather than that of the Airbus. The problem, as we can see, is to ensure that the progress thus obtained is not distributed between regions of the world and manufacturers in such a way that Asian supremacy remains. 

The problem of the European industry's ability to catch up and move towards an accessible and convincing electric vehicle offer will not have been resolved by the attempt to get this Airbus off the ground. It could be solved by competition and the massive efforts that it encourages the very large European manufacturers to make to extract from their multiple partnerships the knowledge and know-how that will enable them to gain competitive advantages individually.

05/07/2021

The weekly column by Bernard Jullien is also on www.autoactu.com.

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