Battery glitches sting automakers racing to electrify Europe lineups

Tesla may have become the first automaker to be valued at a half trillion dollars, but the company has had more than one brush with death. The most recent, which CEO Elon Musk admitted to last month, came in mid-2017. That is when the automaker was pushed to the brink of bankruptcy by what Musk called a "production and logistics hell" while ramping up output of the Model 3.

Long-established automakers initially took comfort in the idea that once they finally had a competitive electric vehicle, they could leverage their decades of expertise in engineering and production to dominate startups such as Tesla, which was forced to assemble Model 3s in a massive tent in 2018.

Creating a whole new value chain using first-time suppliers and expecting to produce automotive-grade components at an industrial scale, however, has proved far more complicated than many automakers thought.

This has been most evident with EV battery components.

"We have had a lot to do together with our cell supplier -- more than we would like -- and it's taken longer than planned," Martin Freese, Volkswagen brand's head of development for high-voltage components and software, told attendees earlier this year at the CAR Symposium in Bochum, Germany.

Freese's comments were made in mid-February, prior to the widescale Europewide lockdowns, showing that battery problems pre-dated the pandemic.

Recalls due to EV battery cell problems have affected Audi's e-tron, the Hyundai Kona Electric, and a number of BMW plug-in hybrids. Faulty inverters forced Volvo subsidiary Polestar to call back the Polestar 2 in October.

Mercedes-Benz, meanwhile, blamed an unnamed supplier in February for extremely low output of its battery-powered EQC. More than a year after the model launched, Mercedes in September surpassed 2,500 monthly sales for the first time.

The problems appear to be systemic, even claiming collateral damage. Opel hasn't been a part of General Motors since summer 2017, but the company was informed last month by Detroit that its Ampera-e electric hatchback suffered from the same problem as its sister model, the Chevrolet Bolt: the battery pack, under certain conditions, can begin to smoke, melt or catch fire.

All 9,500 units of the Ampera-e will have to be fixed, and the only solution GM has promised to provide so far is to artificially reduce the usable portion of the battery to minimize danger.

"Until then we recommend our customers to limit maximum charging," the company told Automotive News Europe. It's quite likely owners will have to return a second time once GM engineers have discovered the precise cause.

New suppliers coming from the consumer electronics world are simply not accustomed to meeting the needs of the auto industry, said Christoph Stürmer, global lead analyst at PwC Autofacts.

"This is above all a value chain issue: all other problems derive from there. Take battery cells as an example. It used to be the case that about half of all output produced was faulty, now it's somewhere between 10 and 20 percent, which is a considerable improvement," he said. "To think this would all work in the first iteration of a new technology is simply not realistic. The real surprise is that anyone is surprised."

The rapid shift toward full and partially electrified cars in Europe coincides with the requirement that fleet emissions in the region decrease to 95 grams per km this year from 122.4 g/km in 2019, according to the European Environment Agency.

To avoid fines automakers need to achieve in 12 months a 27.4 g/km reduction in fleetwide CO2, which exceeds the 25.6 g/km cumulative cut they have made during the last decade.

The urgency to meet the EU's CO2 has prompted every major brand to push EVs and plug-in hybrids.

As a result sales of those models in Europe more than doubled to 768,914 units during the first nine months, according to data from industry association ACEA.

For Daimler, EVs and plug-in hybrids have rapidly become an important part of its European fleet, rising to 14 percent of its now from a 2 percent a year earlier.

Separately, figures from market research JATO Dynamics show that fleet emissions through eight months were down to 102.2 g/km.

Despite the positive progress toward reaching the target some top executives remain convinced that the industry was not given sufficient lead time to get its solutions ready for the market.

"The mindset is, Stop making internal combustion cars; bring all of the mobility to a zero-emissions level and make sure that you do it fast. The speed at which we can do it is going to create a huge stress in the industry," PSA Group CEO Carlos Tavares said.

The pressure to cut CO2 further will only intensify as the EU is expected to demand that fleet emissions be slashed by an additional 50 percent by 2030 compared with this year as part of an accelerated effort to decarbonize the economy.

"Testing will become even more relevant in the future, because the battery systems will be more complex and energy densities will increase," said Artur Schneider, responsible for automotive battery testing at engineering services group TÜV Rheinland, "Innovations will come into play, like other battery chemistries and changes in battery system engineering and car design."

He added that automakers don't a lot of time to adapt. "They will really need to increase their pace of development," Schneider said.

With so much at stake, automakers prefer to recall a model to avoid any headlines that could cause customers to reconsider switching to an electric car.

"There's this preconception that as soon as there's an accident, the battery will catch fire. That's rarely the case and it's not as if gasoline cannot burn," said the chief engineer of a German brand.

Not all battery cells are the same. Plug-in hybrids use cells that need to be equipped to endure far more charging cycles, since their batteries are about a quarter of the size and drain quickly.

BMW had to recall nearly 30,000 plug-in hybrids in October due to impurities in the Samsung prismatic cells used in a number of different models. Despite the setback BMW says everything is proceeding smoothly with the ramp-up of the iX3 full-electric midsize crossover in Shenyang, China, which will be the vehicle global production hub.

"When you build an electric propulsion system in such high volumes, then you are not permitted to make any mistakes in terms of quality," BMW Group CEO Oliver Zipse said. "Quality management has the utmost priority at BMW -- for all model lines, but in particular for EVs."

Part of the problem is the enormous push to drive down costs to make electric powertrains more affordable for consumers, either through innovation in the chemistry or through the production process.

Musk aims to bring Tesla's dry electrode technology pioneered in his pilot plant in San Francisco to a gigafactory currently under construction near Berlin. The process eliminates the need to use solvents and costly, energy-hungry baking ovens when manufacturing cells.

The Tesla CEO warned, however, that significant challenges still need to be overcome to shift from proof of concept to full industrialization of the technology.

"The very difficult part -- and I cannot emphasize this enough -- is scaling up this production and achieving extremely high reliability and safety with the cells," he told a European battery congress in late November.

To achieve the fast cycle time needed for volume production while still maintaining quality Tesla will need to develop advanced automation equipment for every aspect of the production process. "There's quite a bit more work in building the machine that builds the machine than what goes into the cell itself," Musk said.

Software is another recurring problem with new EVs. The full-electric Volkswagen ID3, built on a new dedicated architecture, came to market without its App Connect service or augmented reality head-up display. The fix will require an extra trip to the workshop in the coming weeks.

Before it discovered the faulty inverters, Polestar had to recall its Tesla Model 3 rivals to fix a software glitch in car's battery-energy control module that in some cases caused the EV to lose power to the wheels while driving.

In an interview with Automotive News Europe, Volvo CEO Hakan Samuelsson acknowledged it was "very unfortunate" that Polestar customers had to deal with two recalls in October. While he took responsibility, he pointed out that the entire industry is struggling with the transition to electrified vehicles.

"We are now -- together with everybody in the business -- doing the biggest changeover in technology in decades." he said. "We need to understand that [problems] can happen with new technology, so we must learn from that together with our suppliers and partners."

VW Group CEO Herbert Diess went so far as to warn shareholders at the end of September that the industry's digital transformation was the single greatest challenge his company faces.

Instead of a collection of brands and models, VW needed to prove it can operate millions of what Diess called "mobility devices" worldwide. These devices will always be connected to the customer and capable of offering services that improve the vehicle experience on a weekly or even daily basis.

"This change will be much more challenging than the switch to electric drives. We need skills that do not currently exist in our industry or even in our economic ecosystem in Europe -- skills that we have to acquire," he told investors at the annual meeting.

As a result, he is reprioritizing his multi-annual investment budget. While spending for battery-powered cars has risen at a tepid compound annual rate of 4.6 percent over the past two years, spending on software will rise to 27 billion euros under the new five-year plan from about 8 billion euros in 2018.

Close to half of that is destined for Car.Software Org, a new VW unit that since January has been tasked with developing a new proprietary operating system that could be continuously updated independent of the hardware in the vehicle without causing integration problems with the various systems.

The complexity is dizzying. In the past, among 50 to 70 different control units supplied by roughly 200 different providers had to be connected via as many as five different bus data exchange systems. Squashing the 10,000 bugs in the lead up to series production could cost VW brand roughly 200 million euros annually.

Initially the ID3 was due to debut with the brand's new operating system, but in the course of development Diess realized the severity of the challenge. Car.Software Org was born, with the task of creating a VW.OS worthy of the competition.

By Diess' own account, however, VW is still three to four years behind Tesla on software capability. That is why he reassigned responsibility for Car.Software Org to Audi CEO Markus Duesmann in the summer.

"Tesla customers experience their car like a computer device, basically every fortnight you get an update -- a new experience, a new gadget in the car -- and these capabilities today we don't have," Diess complained.

With all these difficulties in software and EV componentry, it's safe to say Musk's company will remain the benchmark for the industry in both areas for the foreseeable future.

There is some good news for Diess: The first electric ID3s with fully functional software have finally started to roll off assembly lines in Zwickau, Germany this month. Perhaps that will mark the end of the production headaches for Volkswagen.

"Every ramp-up is hell," PwC's Stürmer said. "When you are a one-product company like Tesla, it just shows."