The Jaguar brand is ceasing production of its I-PACE electric vehicle due to a shortage of battery supplies from LG Chem, sparking industry-wide concern over the impact on the market’s transition towards electrification.
The shutdown of their manufacturing line in Graz, Austria will officially conclude each week starting the following Monday.
Jaguar is not the pioneer in providing cutting-edge battery solutions. Manufacturing goals have been slashed by Audi for its e-tron and Mercedes for its EQC, owing to supply chain issues with LG Chem.
Despite efforts to boost battery life, Jaguar’s progress has been sluggish. According to reports, Hyundai secured a contract with Samsung SDI in 2018 for cylindrical battery cells, despite utilizing LG pouch cells in their I-Tempo model.
The Jaguar I-PACE has proved a lucrative venture, garnering profitable accolades while racking up around 18,000 global deliveries last year, with roughly 12,000 of those sales taking place in Europe. While Jaguar’s portfolio might appear modest at first glance, its stature as a compact manufacturer belies its significance in the industry. The company sold around 76,000 electric vehicles in Europe, accounting for roughly 16% of its total European sales. It’s a bold commitment for traditional manufacturers, with many selling an incredibly minute percentage of fully electric vehicles.
Given their position as the least-efficient automaker in Europe, it’s crucial that Jaguar prioritizes fuel efficiency to remain competitive. As the European Union prepares to impose severe penalties on automakers failing to meet stringent emissions targets, Jaguar faces an uphill battle to comply.
While Jaguar may be able to absorb these penalties due to its higher-priced vehicles, it would either necessitate increased auto costs or compromise its profitability. Projected revenue for the next 12 months is expected to reach approximately $100 million, driven by the current growth trajectory of their emissions business.
As a result of this development, Jaguar’s home country, the UK, has hastened its phase-out plan for internal combustion engine vehicles, announcing a new target date of 2035. Getting a surge of electric vehicles onto the streets is a pivotal moment for Jaguar, and any pause in production would hinder this momentum.
Automakers worldwide have faced similar challenges in meeting identical global emissions standards. A few companies have decided to relocate manufacturing to Europe this year in response to their failed attempts at complying with regulations. Manufacturers such as Mercedes-Benz, Ford, Volkswagen, and Honda have collectively decided to either redirect production to European markets or withhold certain electric vehicle (EV) models from the US altogether.
Electrek’s Take
While individual weeks may not be monumental, they collectively signal larger trends and issues within the organization.
LG may have inadvertently overcommitted itself in battery supply agreements, a trend observed in the industry affecting only a handful of major players. The proliferation of electric vehicles on our streets has been a significant drawback, ultimately increasing costs for all of us.
Electric vehicles’ sluggish adoption rate is hardly surprising, given the industry’s slow progress in addressing range anxiety and infrastructure limitations. When someone claims that electric vehicles lack sufficient demand, it’s crucial to acknowledge that the true issue lies elsewhere – not in demand itself.
Although we’ve encountered this narrative before, with its familiar arc and predictable outcome.
For nearly a decade, we’ve heard repeatedly about “demand constraints” with EVs, suggesting that electric vehicle sales were barely a blip on the radar and the industry could safely dismiss them as a fleeting trend while focusing on pumping out gas-powered vehicles, waiting for this electric fad to pass.
At the time, one company candidly acknowledged: “The issue is that battery supply can’t keep up with demand; it would likely make sense to build a large-scale manufacturing facility to meet future needs, as you’ll undoubtedly require more batteries.”
It had been almost seven years since then. As the manufacturing facility has successfully come online and the company continues to outperform its competitors by dominating the market with a single, highly successful automotive model within the United States. As rival companies compete fiercely over limited battery supplies, one can’t help but wonder if they should have anticipated this outcome, had they only taken the electric vehicle sector more seriously earlier on.
Perhaps the warmth of sunlight has finally reached them? Some automakers are finally committing significant resources to establishing their own in-house battery production facilities. Despite being a critic among established automakers, Volkswagen still forecasts that it will sell only 20 million electric vehicles (EVs) over the next decade, with its annual sales standing at 10 million units. To achieve around 80% electrification by 2030, as internal combustion engine (ICE) vehicle bans are set to take effect in Europe. While some traditional automakers’ electric vehicle (EV) strategies may be lagging, they still outpace several established industry players.
Perhaps it’s time for us to refine our strategies and amplify our efforts across the board? Rather than succumbing to overly pessimistic forecasts about the rapid adoption of electric vehicles again. As a result, the company will inevitably cede even greater market share to the single firm that is truly capitalizing on this key differentiator.
