New investment in battery supply as BMW seeks cost cuts

21 November 2019 BMW Group has increased its order of electric-vehicle batteries from two main suppliers as it looks to push ahead with its electrification strategy. The carmaker will now order €7.3 billion worth of batteries from Chinese manufacturer CATL, and €2.9 billion from Samsung. The agreement with CATL is an increase in the original investment of €4 billion. The BMW Group is the first customer of the CATL battery cell plant currently under construction in Erfurt, Germany. ′We strongly supported and played an active part in establishing CATL in Germany,’ said Andreas Wendt, member of the Board of Management of BMW AG responsible for its purchasing and supplier network. The deal with Samsung will see the carmaker be supplied with batteries for its fifth-generation powertrains, and will run from 2021 to 2031. ′In this way, we are securing our long-term battery cell needs. Every cell generation is awarded in global competition to the leading manufacturer from both a technology and a business perspective. This ensures we always have access to the best possible cell technology,’ Wendt announced Responsible source The BMW Group will source the cobalt needed as a key raw material for cell production directly from mines in Australia and Morocco and make it available to CATL and Samsung SDI. The same applies to lithium, which the BMW Group will also source directly from mines, including from Australia. This gives the company full transparency over where both raw materials come from. The news follows the opening of BMW’s new battery compliance centre earlier this month. The aim of the centre is to advance battery-cell technology and introduce it into production processes. The company invested a total of €200 million in the location, which is set to create up to 200 jobs. Cutting costs Meanwhile, the German carmaker is in talks with labour representatives and its top suppliers as it seeks to achieve cost savings of more than €12 billion. ′We are currently discussing additional measures with the Works Council. All parties are working very constructively to make the company even stronger and more efficient,’ CFO Nicolas Peter told analysts. The carmaker is not looking to cut any jobs as it undergoes the spending review. The rush to develop electric cars, together with worries over trade deals with the UK and the US, has pushed BMW, along with other European carmakers, into spending reviews. In addition to this, the emergence of new markets, such as the mobility sector and autonomous technologies, is increasing pressure on company profits. BMW entered a partnership with domestic rival Daimler earlier this year, merging their respective mobility services while agreeing to collaborate on driverless technology, in an effort to cut costs.