Nissan Motor Co. is poised to significantly alter its electric vehicle (EV) strategy in the United States by partnering with South Korean battery manufacturer SK On. This collaboration, reported by Nikkei, involves SK On supplying Nissan with EV batteries starting around 2028. This move marks a strategic shift for Nissan, aiming to enhance its EV offerings in the US market and align with the stipulations of the US Inflation Reduction Act.
The Strategic Alliance: SK On and Nissan
The partnership between Nissan and SK On is a calculated move to address multiple challenges and opportunities in the rapidly evolving EV landscape.
Joint Battery Production
The discussions between Nissan and SK On have centered on the potential for joint battery cell production in the US. This would likely involve the construction of a new battery plant dedicated to supplying Nissan’s US-based assembly facilities. By establishing a local production base, the partnership aims to streamline supply chains and reduce logistical hurdles.
Battery Supply
The initial agreement between the companies outlines a supply of 20 Gigawatt-hours (GWh) of ternary lithium batteries. This volume of batteries is substantial enough to power approximately 300,000 standard electric vehicles. This is a considerable boost to Nissan’s capacity to produce EVs for the US market.
Timeline
While the formal announcement is anticipated later this year, current projections indicate that SK On will begin supplying batteries to Nissan’s US plants starting in 2026 or 2027. The large-scale supply agreement is expected to commence around 2028. The production timeline aligns with Nissan’s three-year business strategy, which is expected to include the SK On partnership.
Why This Partnership Matters
The Nissan-SK On alliance is crucial for several strategic reasons:
US Inflation Reduction Act Compliance
Currently, Nissan’s EVs in the US market are powered by batteries from China-based Envision AESC. This makes them ineligible for subsidies under the US Inflation Reduction Act (IRA). The IRA, enacted in 2022, incentivizes the use of domestically produced or allied country-sourced EV components. By partnering with SK On, a South Korean company, Nissan aims to qualify its EVs for these crucial subsidies, thereby making them more competitive in the American market.
Boosting Nissan’s EV Market Share
In 2023, Nissan sold only 20,000 EVs in the US, a small fraction compared to competitors like Hyundai and Kia, which sold a combined 82,269 units. By securing a reliable supply of batteries that qualify for US subsidies, Nissan intends to boost its EV sales and gain a larger share of the growing US market.
SK On’s Global Expansion
For SK On, this partnership with Nissan is a significant step in its global expansion strategy. The company is already planning to build three battery plants in the US in collaboration with Ford. The alliance with Nissan is expected to further strengthen SK On’s position in the competitive EV battery market, and support its goal to go public in 2026.
Securing Core EV Components
Nissan is also exploring collaborations with other manufacturers, like Honda, to develop and secure core EV components. This indicates a broader strategy to catch up with leaders in the EV market and establish a stronger presence.
SK On: A Rising Force in Battery Manufacturing
SK On has rapidly established itself as a significant player in the global EV battery market.
Global Production Network
SK On operates a comprehensive global network of production bases in North America, Europe, and Asia. This network ensures a stable supply of raw materials and enables efficient production and delivery of batteries. The company’s emphasis on localized production demonstrates its commitment to strengthening global production capabilities.
Commitment to Quality and Innovation
The company is committed to providing high-quality batteries and adheres to strict safety and quality management standards. SK On also heavily invests in research and development to improve battery performance, stability, and efficiency. This includes the development of next-generation batteries and lithium-ion batteries with varied cell chemistries.
US Expansion
SK On is making substantial investments in the US market. Apart from the joint venture with Ford, SK On has also converted some of its production lines in Georgia to supply batteries to Hyundai. The company’s US unit, SK Battery America, is expected to commence partial production at its Georgia Plant 2 and will supply batteries for Hyundai’s new EV production facility, Hyundai Motor Group Metaplant America. These efforts align with its plans to boost production capacity to 152 gigawatts by the end of 2024 from 88 gigawatts at the end of 2023.
Implications for the EV Market
The partnership between Nissan and SK On has several broader implications for the EV market:
Increased Competition
The entry of a major player like Nissan, backed by SK On’s battery technology, will intensify competition in the US EV market. This will likely benefit consumers through lower prices and more diverse vehicle options.
Supply Chain Stability
By establishing localized production of batteries, the partnership will contribute to a more stable and resilient supply chain. This is critical for the long-term growth of the EV industry, which has been prone to supply disruptions.
Technological Advancements
The alliance is likely to spur further advancements in battery technology. SK On’s commitment to research and development, combined with Nissan’s automotive expertise, could lead to improvements in battery performance, range, and charging times.
Focus on US Manufacturing
The decision to establish a battery plant in the US reflects a broader trend of focusing on domestic manufacturing and reducing reliance on overseas suppliers, particularly in light of the Inflation Reduction Act.
Nissan’s Broader EV Strategy
The agreement with SK On is part of Nissan’s broader strategy to transform its business and become a leader in the EV market.
Re-evaluating Business Plans
Nissan is undergoing a series of strategic shifts, including potential job cuts and a possible merger with Honda by 2026. The partnership with SK On is a part of this broader restructuring effort aimed at improving competitiveness and long-term viability.
Second Life for EV Batteries
Nissan is also focusing on the circular economy of EV batteries. The company has partnered with Ecobat in the UK to explore ways to recover, repair, and repurpose used EV batteries. This focus on sustainable practices is an important component of Nissan’s commitment to carbon neutrality by 2050.
Current Battery Suppliers
Prior to this partnership, Nissan relied on Envision AESC as its primary battery supplier. Envision AESC operates battery plants in multiple locations, including the US, Japan, the UK, and China. However, the need to comply with US subsidy requirements has prompted Nissan to diversify its supply chain.
The Road Ahead
The strategic alliance between Nissan and SK On is a pivotal development in the automotive industry. This partnership is expected to significantly impact the landscape of the US electric vehicle market by fostering competition, promoting technological advancements, and ensuring compliance with federal incentive programs. For both Nissan and SK On, this collaboration represents a key step toward achieving their ambitious goals for growth and market leadership. As the EV market continues to evolve, such strategic partnerships will play a crucial role in shaping the future of transportation.
