Volvo Group (NASDAQ: VLVLY) and Samsung SDI Co. Ltd. (KSE:006400) will jointly develop batteries for Volvo's electric trucks.
The strategic alliance announced Thursday, July 18 could help assure Volvo has both the raw materials like cobalt and lithium, as well as battery cell and production capacity to support its growth plans for battery-electric trucks.
The Swedish truck maker delivered its first battery-powered FE refuse truck and FL straight truck in February to European customers. It plans commercial sales of an electrified version of its VNR day cab model in the U.S. as soon as 2020.
Third-party logistics hauler NFI Industries expects to receive the first electric VNR later this year for testing as part of the 16-member Volvo LIGHTS consortium working on all aspects of electro-mobility in California. Volvo's Mack Trucks division revealed a Mack LR electric-powered refuse 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 on our journey towards offering the world's most truly sustainable transport system with fossil-free alternatives for our commercial vehicles," stated Martin Lundstedt, Volvo Group CEO.
Samsung will provide battery cells and packs directly to Volvo manufacturing plants, Lundstedt said.
"Rather than just buying some off-the-shelf cells, they are working with Samsung to optimize the chemistry and packaging. Volvo is going to specify what they need," said Sam Abuelsamid, principal analyst with Navigant Research.
Assuring sufficient raw materials and manufacturing capacity is critical in reaching a deal, because most OEMs do not make their own cells or battery packs.
"Most likely, Samsung gave them guarantees," Abuelsamid said.
Samsung indicated it has the capacity to meet Volvo's needs.
"We are confident this alliance will secure the market leadership of the two companies in the long-term," said Young-Hyun Jun, CEO of Samsung SDI.
Lundstedt said Volvo investigated the major players in battery chemistry and cell production, including LG Chem and Panasonic, before aligning with Samsung.
Since there is no equity tie-up, calling the arrangement a partnership might be a slight overstatement, Abuelsamid said.
"This is increasingly the term of art being used and there's nothing wrong with that if it really does include some co-development," he said.
Volvo is wise to avoid an equity or other financial tie-up, said Antti Lindstrom, a trucking industry analyst with IHS Markit.
"This is a cheaper way to get in from Volvo's perspective," he said. "You aren't going to lose your shirt if something goes south here."
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