Overcoming Automotive Industry's Battery Manufacturing Challenges

Battery technology is advancing rapidly, requiring efforts to adapt rapidly to the industry's rapid changes.

FREMONT, CA: The batteries used in electric motors are different from those used in conventional ICE vehicles, such as lithium, cobalt, and nickel. Gigafactories are extremely large facilities that produce EV batteries with a capacity exceeding one gigawatt per year. Gigafactories accounted for about 80 percent of battery production capacity in 2020. Cell manufacturers operate most gigafactories, but OEM are also becoming more active in this space.

A gigafactory operator faces two major challenges. The construction of facilities involves construction issues, which lead to delays and increased costs. It is common for companies to experience operational inefficiency after opening gigafactories. By 2025, McKinsey predicts that 30 percent of newly added annual capacity will be at risk in North America alone if the current trend of delayed production starts and prolonged ramps continues, leaving more than 300,000 vehicles without batteries.

Handling construction issues: Studies show that the EV industry will need 200 new gigafactories by 2030, in addition to 130 gigafactories already in place, an investment of more than USD 400 billion. Companies will likely build new manufacturing facilities near OEM to reduce inventory needs and lead times. Internationally shipped batteries can cost over $7,000 each, so the pipeline inventory value for these batteries is very high.3 But design and construction complications can delay production by up to 12 months.

It may be possible for gigafactory operators to avoid common problems by recruiting strong construction talent during the site-planning phase or earlier. The most difficult positions to fill, such as those related to electrical and mechanical craft labor, require the most attention. Gigafactory operators may also benefit from paying attention to local design standards and regulatory concerns early, such as wastewater, and from using suppliers in the local industrial base with the ability to provide on-site support and respond more quickly to problems related to quality and output.

Increasing operational efficiency: Due to ongoing labor shortages, unexpected downtime, and operational troubles, many new facilities have been unable to meet their production targets. Batteries cell manufacturers and OEM they supply can suffer enormous consequences if production is lost.

It is important that cell manufacturers consider the talent pipeline throughout the entire process, from site selection to construction to process training, in order to minimize labor issues. It is also necessary for them to consider how local workers may differ from those at their other facilities in terms of their daily routines and skills. A gigafactory may benefit from having an on-site, cross-cultural organization that employs employees with global experience to assist local employees in developing strategic competencies. Since battery demand may increase, cell manufacturers should consider their future talent requirements when planning R&D activities for next-generation manufacturing. Recruiting and training efforts must adapt quickly to the industry's rapid changes, and battery technology is advancing rapidly.