After Two Years and $300M in Funding, Brandless Shuts Down

Summary

General Motors and LG Chem decided to partner with each other to mass-produce battery cells for future electric vehicles. Together, they will invest a total of $2.3 billion into a new, equally owned joint venture company that will establish a state-of-the-art battery cell assembly plant. Their partnership also includes a joint-development agreement to improve the existing battery technology.

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General Motors is America’s largest car manufacturer with 17% total market share and has a market cap of $50.35 billion. Housed within the GM umbrella are well known car brands such as Chevrolet, GMC, Buick, and Cadillac. LG Chemical is the chemical manufacturing arm of LG Corporation and largest chemical manufacturer in Korea. It has a market cap of $17.7 billion and revenue of $20.4 billion.

The electric vehicle market is an emerging technology market with extremely high promise. It boasts a compound annual growth rate of 17.2% and is estimated to have a market size of $84 billion by 2025. In the global market, the largest electric vehicle manufactures include Tesla, Toyota, BYD, and Volkswagen.

Despite being a potentially lucrative industry, there are many challenges that suppliers and manufactures must overcome before electric vehicles become heavily adopted by the world. Most of these challenges can be attributed to the batteries. Due to the infancy of its technology, the batteries cause electric vehicles to have short ranges, long recharge times, and high prices. The partnership between GM and LG Chem looks to solve these problems.

The companies will invest a combined $2.3 billion to create an equally owned joint-venture company. This will fund a state-of-the-art battery plant in the Lordstown area of Northeast Ohio and, combined with GM’s recent sale of another manufacturing plant in Lordstown, will establish the region as a major hub for battery production. An estimated 1,100 jobs are also expected to be created with the introduction of this plant.

The partnership is focused on the future of the electric vehicle market; it will allow LG to vertically integrate the manufacturing of batteries in the US and gain access to an experienced workforce. GM will also benefit from having a dedicated production stream of batteries for their new line of electric vehicles which are expected to be rolled out in the coming years. 

Most importantly, however, is the technological advances that will come about with this partnership. The companies have signed a joint-development agreement that brings the two leaders in battery science to improve the technology behind them, to reduce costs and improve performance. This is a major step to improving the future of electric vehicles. 

In a rapidly growing and changing EV market, the importance of infrastructure cannot be overemphasized. The cost of batteries is quickly moving towards a point of inflection at which EVs will be cheaper than gas-powered vehicles, at which point the car as we know it will become obsolete. Bringing together juggernauts in chemicals and auto manufacturing – once an extremely speculative vision – is now a chancy play to stay relevant for both players.