Why automakers are looking to move parts in-house


Now automakers are going directly to chipmakers, who previously would have sold their products to top-tier vendors like Bosch, Continental and Harman. This leads to an unprecedented situation where automakers like Ferrari, Renault, Volvo and Mercedes are reporting collaborations with chip vendors like Qualcomm and Nvidia.

“The traditional tier one and tier two go-to-market model has evolved,” noted Enrico Salvatori, President of Qualcomm Europe.

The new vertical integration approach is different from the old model, where automakers forged the cylinder blocks themselves. They don’t have or want the ability to manufacture chips or refine battery materials. But they want to secure supply long before they need it and that means investing or partnering with specialists.

For example, VW has partnered with China’s Gotion for a new battery cell factory in Salzgitter, Germany, which is expected to start in 2025. Volkswagen and Volvo have invested in Swedish battery company Northvolt to create partnerships that will ensure cell production. Both Stellantis and Mercedes have a stake in French battery company ACC, while Renault has invested its own money in battery maker Verkor.

Investments in battery companies give automakers a greater financial stake in the most expensive element of an electric car, but concern now is whether they will be able to source the raw materials for their ever-expanding promise of electric vehicle production.

They’re trying to solve the ‘great commodity disconnect’, as a commodity analyst firm Reference Mineral Intelligence the formula. “At the moment there is insufficient investment in raw material supply to meet battery demand in 2030, let alone 2040,” said CEO Simon Moores last year following claims made by some automakers at the COP26 climate summit to go all-electric by 2040.

So they go further. As always in the modern automotive world, they generally follow the example of Tesla, which led the way with its partnership with Panasonic on batteries. Tesla has also decided to secure raw materials with agreements with the BHP group on nickel and Glencore on cobalt. Stellantis is talking with companies to secure lithium while Renault has signed an agreement with a company that aims to extract lithium from the Upper Rhine Valley in Germany. BMW, meanwhile, has invested in an American company called Lilac Solutions that is researching environmentally friendly methods to extract lithium.

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