Panasonic Forges Alliance With Beijing Automotive Group For Chinese Market
Originally published on Gas2.
This is not a time for global companies to sit around and rest on their laurels. Panasonic is pushing ahead with its partnership with Tesla Motors to build the Gigafactory in Nevada. Now it has also forged an alliance with Beijing Automotive Group (BAIC) to manufacture electric car parts and components in China. Beijing Automotive is expected to have a 54% stake in the new company, with the remaining investment coming from Panasonic’s Chinese operations.
According to Kyodo News, Panasonic plans to manufacture parts and components, including climate control systems, for electrified vehicles. Sources say the deal was completed in May. The two companies will build a factory in Tianjin, a major city in northeast China.
Because China has the world’s largest new car market, major corporations are rushing to establish a presence within the country. In February 2016, Panasonic established a battery venture in China with Dalian Levear Electric Company. The partnership is a 50/50 joint venture. Its official name will be Panasonic Automotive Energy Dalian Co. Lithium ion battery production will start in the Chinese city of Dalian in 2017. The batteries produced there will supply the Chinese electric vehicle market Some will also be exported as well.
Beijing Automotive is an established player in China’s auto market. Its brands include BAIC, Beiqi, Changhe, Foton, Huanso, and Weiwang. Thhe company has manufacturing alliances with foreign partners Hyundai, Mercedes-Benz, and Suzuki, according to China Auto Web. One of its popular electric cars in China has been the BAIC EV200.
Foreign companies that want to manufacture products in China are required to work with a local partner. Making products in China means the finished goods will be exempt from substantial import duties levied by the Chinese government on imported products. For instance, the duty on imported cars is 25%.
LG Chem is another battery company getting more deeply involved with manufacturing components for electric cars. As part of its partnership with Chevrolet, it is not only supply the battery for the upcoming Chevy Bolt, it is also making the climate control system, instrument cluster, and infotainment touchscreen. One of the byproducts of the electric car revolution is that car companies are increasingly becoming assemblers of components made by others rather than manufacturers.
Source: Hybrid Cars Photo credit: BAIC
Reprinted with permission.
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The intellectual property agreement for co-inventions between tesla and Panasonic must be very interesting. Employees of the two, working shoulder to shoulder at the Gigafactory will invent many process and product innovations. Who owns rights? How is ownership assigned. These agreements can be very difficult to write, negotiate, and implement. Now Panasonic will make batteries in China and with other partners. Can they use Nevada inventions? And so on.
Yes. That could be interesting. Tesla has given away a lot of patents. With Panasonic, how do they do it?
Change the colour, change the shape, change the branding, and it’s an all new invention. Right?
Those would be trademarks, potentially “design” patentable (a very narrow, and often limited benefit type of a patent), but not “utility” patentable. Utility patents can be very powerful when done right. Chemistry, process, mechanical, and so on can go into utility patents.
In the real world, perhaps 90+% of the manufacturing intellectual property is tribal lore, “trade secrets” on how to make something and it’s not written down nor even articulated internally in all cases. This type of IP gets transferred when employees go to a new location and start it up. They have all the same equipment built by the suppliers, travel to the new factory, start production, and train the new crew. Panasonic will learn a boatload of IP in Nevada (as will Tesla, of course, that’s why Tesla engaged Panasonic in the first place). The two organizations will take this manufacturing to a new level. Then that will travel to wherever Panasonic does battery production.
A good example of this is wine making. Look at 1930 and the best (not greatest) wines came from a few area and the drop down to next level was large. The people spread, and there are very good vines made all over the world. A great thing for wine drinkers.
Tesla needs a second fully automated GF. A GF where there is no IP being transferred between employees and companies. They can automate driving surely they can automated manufacturing!
I would like to ask a question, but not start a flame war please. How are WTO rule written that China having “duty on imported cars is 25%” is ok, but India having domestic content rules is not. I not asking for views on politics, just a better understanding of WTO. Is it as simple as import duties are ok and content rules are not allowed.
Probably just bad old power politics. To get China into the WHO, they had to give it concessions. Might is right
After reading “Death by China” by Navarro and Autry, I’d caution Panasonic that creating a joint venture with the Chinese owning 54% is risky. Elsewhere the article states 50/50, but I doubt that is the true split of ownership.
Will this venture impact Tesla negatively? Will it impede Tesla from making a GF2 in China or impede Tesla’s access to cheap batteries once Tesla makes a Chinese factory?
Panasonic seems a bit unreliable. To be honest I wish Tesla would do an end-run around Panasonic.
Panasonic pretty much has a lock on the ANC (aluminum nickel cobalt lithium) battery chemistry which Tesla wants. It is almost as energy dense as cobalt lithium used in most cell phones and laptops, but a bit more stable and Tesla has perfected the cooling system to prevent thermal runaway, so they don’t want to use the NMC (nickel manganese cobalt lithium) chemistry which most car manufacturers are using because it is less energy dense. Despite the rumblings that Tesla is angry at Panasonic for not being able to properly supply their Powerwalls, there is no way that Tesla will try to throw Panasonic out of the Gigafactory. Panasonic is putting up $1.5 billion and they have the right battery chemistry and are reported to have some of the best processes and manufacturing equipment in the battery industry, which is why nobody is allowed to take an photos of that part of the Gigafactory, whereas you can find plenty of videos online of Tesla manufacturing. It would be very foolish for Tesla to not work with Panasonic. At first Panasonic was reluctant to invest so heavily in batteries due to the risk, but now the management appears to be ready to expand battery production in a major way.
Well, my biases may be showing, Panasonic will not have a lock on it much longer. I expect China will see to it regardless of IP laws.