Barron's (Online); New York (Jul 26, 2022).
General Motors one-upped itself on Tuesday. The company reported second-quarter earnings , but a pair of battery supply-chain announcements look to be the bigger deal for the company.
For starters, GM (ticker: GM) and LG Chem (051910.Korea) have signed an agreement for 950,000 tons of cathode material. That's enough material to make roughly five million electric vehicles and enough to support GM's goal of making one million EVs in North America in 2025.
LG Chem and GM also will explore localizing cathode production in North America. Most cathode materials today are manufactured in Asia.
The cathodes in lithium ion batteries are compounds manufactured by companies, such as LG Chem, which process raw materials into battery components. investors hear about such as lithium-cobalt-manganese or lithium-iron-phosphate.
Companies such as Livent (LTHM) mine and process the lithium . GM on Tuesday also announced a deal with Livent for lithium hydroxide supply.
Lithium ion batteries use lithium carbonate or lithium hydroxide as raw materials. Lithium hydroxide includes better power density, or more juice in the same battery size.
Lithium carbonate and hydroxide are refined from lithium compounds that Livent or other lithium miners make. Livent aims to process its lithium compounds and aims to supply GM lithium hydroxide from North American locations. Livent mines lithium in South America.
Most lithium is processed in Asia today. U.S. auto makers such as GM want local supplies of lithium, just like they want local supplies of cathode materials.
"We are building a strong, sustainable, scalable and secure supply chain to help meet our fast-growing EV production needs," said Jeff Morrison, GM vice president, global purchasing and supply chain, in a press release. "We will further localize the lithium supply chain in North America over the course of the [Livent] agreement."
Both deals demonstrate just how serious GM is about producing EVs to compete with Tesla (TSLA) and other auto makers. GM plans to roll out 30 new EV models around the globe by 2025.
GM has committed tens of billions of dollars to make that happen, including building battery capacity in the U.S. with battery LG Chem. The deals Tuesday should ensure that capacity has the raw material to run efficiently.
GM stock is down 1.3% in early trading Monday. S&P 500 and Dow Jones Industrial Average futures are off 0.4% and 0.5%, respectively. GM reported weaker than expected second-quarter earnings per share. But GM already guided investors to a messy quarter. The company didn't finish 95,000 vehicles in Q2 due to part shortages. GM maintained its full-year operating profit guidance of about $14 billion.
Livent stock is up $4.3% in premarket trading.
Coming into Tuesday, GM stock has fallen 41% this year, while the S&P 500 and Dow Jones Industrial Average have declined about 17% and 12%, respectively. Investors aren't as concerned with EV profits right now. They are worried about a recession hitting demand and profit.
Write to Al Root at email@example.com
GM Announces Big EV Battery Deals as It Targets Tesla
Credit: Al Root