Dive Brief:
- BMW is scaling its in-house battery production for mass electric vehicle (EV) production by 2020, Forbes reported, and will manufacture EVs on the same assembly line as its traditional combustion-engine vehicles.
- The Germany-based automaker is also planning to release 25 new EV models by 2025, according to the report, and plans to start making a fully electric MINI next year.
- The news comes right on the heels of Tesla hitting its goal of producing 5,000 (fully electric) Model 3s per week, ramping up the competition among automakers to mass produce electric cars, which may stress battery and raw materials supply chains.
Dive Insight:
Automakers see EVs as the future, and are aggressively transforming their supply chains to ramp up production to meet rising consumer demand. Making batteries in-house, however, is a significant supply chain challenge.
Tesla tried it first, and the burgeoning automaker's struggles to break into an extremely competitive market did not go unnoted by the rest of the auto industry: as a global car company with a stronger supply chain and logistics network, BMW is well-poised to make a big splash in the EV market, but may face difficulties as it accelerates its EV supply chain.
But the use of cobalt, which is necessary for EV batteries, could be a problem for auto procurement. The EV boom is putting pressure on cobalt prices, which could strain the profit margins of automakers flooding the EV space. BMW may be especially at risk because of its ambitious EV plan to be ready to mass produce by 2020.
Furthermore, the cobalt industry has a dirty, bloody history of violating human rights and child labor, which adds further risk to auto supply chains in terms of brand image. Tesla CEO Elon Musk said he wanted to cut cobalt from Tesla batteries back in January — but that's easier said than done. Cobalt is still a necessary ingredient for EV batteries, and no automaker has found a workaround yet.
BMW has adopted what might be a more practical approach: auditing cobalt suppliers for human rights risk. But even that strategy will come under stress as BMW rapidly accelerates production to mass produce EVs.
Then there's the struggle of shipping the batteries, which are made with sensitive, flammable materials and may require hazmat labels and necessitate shipping surcharges. Then, once BMW procures the necessary materials for EV assembly, the automaker will attempt to streamline operations by integrating EV assembly with its current assembly line for traditional combustion-engine vehicles.
In the long run, that could generate a lot of supply chain efficiency for BMW, but in the short run it's likely to be very bumpy. EVs are a totally different beast from traditional vehicles, as Tesla's difficulty with EV production demonstrates.
Thus, BMW changing its auto supply chain to mass produce EVs will likely result in higher supply chain costs in the short run and perhaps even some setbacks as it tests the best way to make the cars. Ernst & Young told Supply Chain Dive's Deborah Abrams Kaplan that automakers switching to mass EV production will be a logistical challenge, and no automaker is exempt from those challenges.
The real differentiator between the automakers racing to produce EVs will be the ones who have prepared for these logistical challenges and have cost-savings plans in place to counter them. Ultimately, it will come down to who has most accurately predicted demand for EVs: BMW seems to think it's time to mass produce, but the real question is, do most consumers want EVs?
