The announcement of the joint venture raises a number of questions, and we set out in detail some of our views on the implications.
GM and Honda announced jointly that they will expand their existing EV partnership. In a previous announcement, the partners jointly developed and created models for the North American market – in the case of Honda, it meant the future Honda Prologue SUV and the so-called Acura SUV codenamed S223. Both will be manufactured by GM and use the GM BEV3 platform and GM / LG Ultium battery and transmission technology.
The couple confirmed in a statement that they will build a “series of affordable electric cars” with production of “millions”. A key detail in the announcement is the commitment that the new models that will appear in 2027 will be “affordable”.
Mary Barr of GM said that “GM and Honda will share our best technology, design and manufacturing strategies to supply affordable and desirable EVs globally, including our key markets in North America, South America and China.”
Honda Executive Vice President for North America Rick Shostek told the media: “Ultimately, we are looking for parity with [internal combustion engine] proposals … but we have a lot of work ahead of us to achieve that. ”
However, the announcement of the joint venture raises more questions than answers. Below we detail some of our thoughts on the consequences.
What markets are these new available EVs targeting?
Most likely originally North America, especially if the cells will be shipped from LG factories on the continent. China is less likely because Honda already has EV partnerships with GAC and Dongfeng, which create electric vehicles using items sourced from Chinese suppliers. Honda’s European EV strategy is going to expand to include e: Ny1, but it could be imported from China instead of a European manufacturing base – so Europe isn’t seen as an option like North America.
What does affordable mean?
Initial reports indicate that a price of less than $ 30,000 is the target for the new models. A quick look at the American website Honda shows that this market is limited by subcompact crossovers HR-V, Civic and Accord. Given that the base Accord hybrid starts at $ 27,320, we can probably rule out that segment as well. Not surprisingly, given how closely OEMs compare each other, a similar story is on the Chevy website with the Spark sub-hatch and the Trax and Trailblazer crossovers that match the bills.
In the case of GM, each of the three models costing less than $ 30,000 is imported from Korea due to the need to meet margin and price targets. As BEVs increase the cost of finding future models, the question arises as to whether Mexico will be a preferred place of production if the USMCA’s rules of origin need to be followed. The key to this will undoubtedly be the origin of the battery – more on that later.
No competitor in North America has yet offered the desired and affordable EV. Despite all that Tesla has noticed that the Model 3 is the leader in the mass EV market, it is still too expensive for most buyers looking for new, affordable vehicles.
The Chevy Bolt (before battery problems began to plague him) was a contender in the space, costing around $ 30,000, but its B-segment hatchback format meant it was unlikely to find many buyers in North America. The fact that the price of Bolt fluctuated around 30 thousand dollars, indicates the size of the task set by GM and Honda. “Favorite place” lies in the small SUV segment, but reaching a price below $ 30,000 with the BEV still remains a big issue.
The cost of raw materials for batteries is rising. How will the goal be achieved?
Lithium prices rose last year due to sharp demand and limited supply, while the conflict between Russia and Ukraine affected nickel prices. At present, these goals look very difficult to achieve, but both GM and Honda view this more strategically and view the current supercycle of goods as something that will take place as shifted supply chains are repaired and supply constraints are eased.
What battery will they use?
If these cars are to reach our hypothetical price of $ 30,000, they will probably use a small package (perhaps about 50 kWh). Packing 50 kW / h in the C-segment SUV can be equated to a range of 150-200 miles (looking at comparable models such as the Peugeot e-2008). The Ultium battery is designed as a modular – GM / Honda can add or remove cell groups as needed to make smaller / cheaper packages or larger / more expensive packages with a larger range. Given that the Hummer EV uses a 200 kW / h package with 24 modules, the package of the available model will probably be in the form of 6 modules with a capacity of about 50 kW / h.
Ultium modules contain long cells that can be stacked vertically or horizontally – which is said to be unique in the industry. The system also monitors cells through a wireless battery management system – for the first time in the industry. Ultium cells are not significantly better or worse on an equal footing compared to competitors, but benefit from the mass standardization of single cell use and module format across the entire car lineup. This means that parts prices can be reduced, allowing GM and Honda to get competitive items at the lowest possible price. Currently, Ultium is based on NCMA 90 chemistry (90% nickel in cathode and cobalt below 5%) – while this type offers the best energy density of all currently commercially available cathodes, it has seen a sharper rise in prices as a result of Russia – The conflict in Ukraine and the wider shortage of raw materials due to the mismatch of supply and demand. In the future, many EVs in the affordable market will switch to iron-based LFP cathodic chemistry, which is more affordable and less prone to current fluctuations in raw material prices.
Where will the batteries come from?
As with most EV projects, rechargeable batteries must be supplied locally.
This is due to the fact that between their weight and the tendency to occasionally set fire to batteries do not move well over long distances. In addition, consideration should be given to the implications of rules of origin from the USMCA agreement, which may require the battery to be shipped from North America.
Ultium Cells, a GM-LG battery joint venture, has three North American battery plants:
- Lordstown, Ohio (due to open in August 2022, approximately 30 GW / h).
- Spring Hill, Tennessee (due to opening in late 2023, approximately 30 GW / h).
- Lansing, Michigan (due to opening in late 2024, approximately 50 GW / h).
Can the actions of competing OEMs inspire the GM / Honda ad?
This move reflects the high competitive rates in the automotive industry today. All OEMs have to switch to EV, which entails huge capital costs and possibly a long way to the healthy profitability of new EV models as players bear the cost of retrofitting or building factories for electric vehicles and purchasing cells.
At the moment, Tesla is holding its cards close to its chest, but has repeatedly stated that it wants to offer affordable EVs to help speed up the transition to clean energy. Obviously, the Model 3 was not an affordable EV savior, as in most models that sell for $ 50,000.
There are still rumors that the company will build a Model Q (or Model 2) that will be below the Model 3 in the range, possibly with BYD batteries – if true, it will be exported from China to Europe and beyond. If the Model Q ever breaks the cover, the estimated $ 30,000 worth of GM and Honda EVs will be among the most compelling competitors in the industry. Last year, Toyota approached local partner BYD to launch an EV in China worth less than $ 30,000. The EV will use a BYD battery with an LFP battery. VW Group is also committed to affordable EVs, its ID.LIFE EV concept has been showcased with a 62 kW / h battery.
How will the conflict between Russia and Ukraine affect the statement?
The most direct impact of the conflict between Russia and Ukraine on this announcement is the continued pressure to raise nickel prices (with Russia’s Norilsk Nickel being the leading supplier).
This dramatically raises the price of raw materials for batteries at a time when it was hoped that increased supplies and production experience would bring cell prices below the $ 100 per kWh needed to achieve cost parity with ICE cars. GM / Honda will know that increasing the cost of input materials will make it harder to offer affordable EVs at a certain price – they can count on a relatively quick resolution of the conflict and a subsequent reduction in raw material prices.
What does Honda bring to the new models?
When the partnership between GM and Honda from North America was announced, Honda noted that it would bring its ADAS experience to the partnership.
Honda is still in the process of creating a market in terms of BEV in the US. Honda can minimize its risks by working with GM and vice versa, as well as reducing costs by combining their purchasing power. According to rumors, Honda is looking to set up its own 40 GWh battery plant in the US with LG outside of its existing partnership with Ultium. However, there is no concrete news in this regard yet. Honda’s recent mobility partnership with Sony may also come into play. Sony is expected to contribute images, sensing, infotainment and connected technologies to the EV-branded EV, built on the Honda platform. It is possible that this partnership over time will lead to the spread of Sony’s digital influence on more models in the Honda line.
