Volvo Group (NASDAQ:VLVLY) and Samsung SDI Co. Ltd. (KSE:006400) is jointly developing batteries for Volvo electric trucks.
The strategic alliance announced on Thursday 18 July could help ensure Volvo has access to raw materials such as cobalt and lithium, as well as battery cells and production capacity to support its growth plans for battery electric trucks.
Third-party logistics company NFI Industries expects to receive its first electric VNR later this year for testing as part of the 16-member Volvo LIGHTS consortium working on all aspects of electric mobility in California. Volvo’s Mack Trucks division unveiled a Mack LR electric-powered garbage truck in April that will be tested by the New York City Department of Sanitation in 2020.
“The alliance with Samsung SDI is an important next step in our journey towards delivering the world’s most sustainable transport system with fossil-free alternatives to our commercial vehicles,” said Martin Lundstedt, Volvo Group CEO.
Lundstedt said Samsung will supply battery cells and packs directly to Volvo’s manufacturing plants.
“Instead of just buying some off-the-shelf cells, they are working with Samsung to improve the chemistry and packaging. Volvo will figure out what they need,” said Sam Abu Al-Samid, principal analyst at Navigant Research.
Ensuring there are enough raw materials and manufacturing capacity is critical to reaching an agreement, because most OEMs do not make their own cells or battery packs.
“Samsung probably gave them guarantees,” Abu Al-Samad said.
Samsung has indicated that it has the capacity to meet Volvo’s needs.
“We are confident that this alliance will secure market leadership for both companies in the long term,” said Young Hyun Jun, CEO of Samsung SDI.
Lundstedt said Volvo investigated major players in battery chemistry and cell production, including LG Chem and Panasonic, before allying with Samsung.
Abu Al-Samid said that since there is no equity partnership, describing the arrangement as a partnership may be a slight exaggeration.
“That’s a technical term that’s being used more and more, and there’s nothing wrong with that if it actually involves some co-development,” he said.
Volvo would be wise to avoid entering into stocks or other financial commitments, said Antti Lindstrom, a trucking industry analyst at IHS Markit.
“This is a cheaper way to get in from Volvo’s point of view,” he said. “You won’t lose your shirt if something happens here.”
