Nissan Motor Co. has recently solidified a significant agreement with South Korea’s SK On to secure a substantial supply of electric vehicle (EV) batteries. This deal marks a crucial step in Nissan’s efforts to establish a robust domestic supply chain for its expanding EV lineup in the United States. The partnership will see SK On providing 20 gigawatt-hours (GWh) of batteries, enough to power approximately 300,000 EVs. However, this development comes amid significant shifts in Nissan’s production plans, including delays at its Canton, Mississippi, plant and the cancellation of a smaller electric SUV model.
The Battery Supply Deal: A Closer Look
The agreement between Nissan and SK On involves a substantial battery purchase estimated at $1.8 billion. The 20 GWh of batteries will be of the ternary lithium variety, a technology widely used in modern EVs. This deal is expected to support Nissan’s future EV production in the U.S. and is part of a broader strategy to enhance its competitiveness in the rapidly evolving EV market.
SK On: A Key Player in the Battery Market
SK On, a subsidiary of SK Innovation, is a prominent global battery manufacturer. The company has been expanding its footprint in the U.S., with significant investments in manufacturing facilities in Georgia. SK On’s U.S. operations, known as SK Battery America, currently supply batteries for the Ford F-150 Lightning and Volkswagen ID.4. The company is also developing a joint venture battery plant with Hyundai in Georgia, slated to begin operations by late 2025.
SK On’s production capabilities and technological expertise make it a valuable partner for Nissan as it seeks to secure its battery supply chain. The company’s focus on high-nickel technology and continuous investment in research and development position it as a leader in the EV battery sector.
Nissan’s Shifting Production Plans
Despite securing this critical battery supply, Nissan’s EV production plans in the U.S. have faced considerable turbulence. The company had initially planned to begin EV production at its Canton, Mississippi, plant in 2025, following a $500 million investment to prepare the facility. However, due to concerns over profitability and EV demand, the production start date was pushed back to 2026 and again to 2028.
Delays at the Canton Plant
The Canton plant was intended to become a hub for Nissan’s EV production in the U.S. The facility was slated to produce five new EV models, including both Nissan and Infiniti branded vehicles. However, the recent delays mean that these models will not be available until 2028 at the earliest. This timeline shift has raised concerns about Nissan’s ability to keep pace with competitors who are rapidly expanding their EV production.
Cancellation of a Smaller Electric SUV
Adding to the uncertainty, Nissan has also reportedly canceled plans to build a smaller electric SUV in the U.S. This model, which was intended to fill the gap between the LEAF and Ariya, was expected to be the fifth EV produced at the Canton plant. The cancellation signals a strategic shift by Nissan, focusing on more profitable and higher-demand vehicle segments.
Nissan’s decision to scrap the smaller SUV model highlights the company’s focus on larger, more expensive vehicles. This move is aimed at maximizing profits in a competitive market, but it also indicates a less diversified EV lineup for the immediate future.
Implications for Nissan’s EV Strategy
Nissan’s latest moves, including the battery supply deal and production delays, paint a complex picture of the company’s EV strategy. While the partnership with SK On ensures a crucial battery supply, the production delays and model cancellations have created some uncertainty about the company’s direction.
Establishing a Domestic Supply Chain
A key focus for Nissan is building a domestic supply chain for EVs in the U.S. The agreement with SK On aligns with this objective, ensuring a local source of high-quality batteries. This is particularly important in light of the Inflation Reduction Act, which incentivizes companies to manufacture both vehicles and components within the U.S.
Market Share Challenges
Nissan faces the challenge of regaining market share in the competitive EV landscape. The company’s U.S. market share has declined by 2.1% over the past five years, currently standing at 5.8%. As competitors like Tesla, Hyundai, and Honda rapidly expand their EV offerings, Nissan must address its dwindling market share to remain competitive.
Potential Merger with Honda
Nissan is also exploring a potential merger with Honda to strengthen its position in the EV market. Both companies are collaborating on EV technologies, including battery specifications, and mutual supply of components. This partnership could lead to cost reductions and shared resources, helping both companies to compete more effectively against rivals.
SK On’s U.S. Operations
SK On has established a significant presence in the U.S. with its SK Battery America unit. The company has invested substantially in its production facilities in Commerce, Georgia, aiming to produce some of the world’s safest and fastest-charging EV batteries.
Georgia Production Facilities
SK Battery America’s facilities in Georgia have a combined annual capacity of 22 GWh, enough to power around 300,000 EVs annually. The company has invested $2.6 billion in these plants, creating 2,600 high-skilled jobs. These facilities produce batteries for various automotive brands, showcasing SK On’s position as a key supplier in the U.S. market.
Impact of U.S. Subsidies
SK On is also set to benefit from U.S. government subsidies, such as the Advanced Manufacturing Production Credit. This credit provides tax incentives for domestically produced battery cells and modules, further incentivizing SK On’s U.S. expansion. The credits earned in the second quarter of 2024 alone totaled 111.8 billion won ($345 million).
The Path Forward for Nissan
Nissan’s future in the EV market depends on its ability to navigate these challenges and execute its strategic plans effectively. Here are some key factors that will influence the company’s success:
Timely Launch of New EVs
The successful launch of the new EVs produced at the Canton plant will be crucial. Nissan needs to meet its revised production timelines and ensure these vehicles are competitive in the market.
Re-evaluating Product Strategy
Nissan must carefully assess market opportunities and adjust its product strategy accordingly. Focusing on higher-demand vehicle segments while ensuring a balanced EV portfolio is essential.
Strengthening Partnerships
The ongoing partnerships with SK On and the potential merger with Honda could provide significant advantages. These collaborations could lead to cost efficiencies, shared resources, and enhanced technological capabilities.
Innovation and Technology
Continuous investment in research and development is essential for Nissan to stay at the forefront of EV technology. This includes improving battery performance, charging speeds, and overall vehicle efficiency.
Conclusion
Nissan’s agreement with SK On to secure EV batteries is a significant step in the company’s efforts to establish a robust domestic supply chain. However, this development is accompanied by shifts in production plans, including delays and model cancellations. Nissan must navigate these challenges strategically to regain market share and compete effectively in the rapidly evolving EV landscape. The company’s ability to execute its plans and leverage key partnerships will determine its success in the electric vehicle market. The road ahead may be challenging, but with the right approach, Nissan can still make a significant impact in the growing world of EVs.
