Nidec and PSA to Establish JV for EV Traction Motors in France
Nidec poised to become a force majeure in Europe
In December 2017 Japanese motor manufacturer Nidec and French automaker PSA Groupe announced a joint venture (“JV”) for design and production of electric vehicle traction motors in France.
According to PSA, the JV will invest €220 million (US $274.1 million) to build up capacity to produce 900,000 motors per year from 2022 for PSA Groupe mild hybrid, plug-in hybrid, and battery electric vehicles, as well as those of other automakers.
The JV’s motors will be used in Peugeot, Citroen, and DS electric vehicles, as well as PSA’s recently acquired Opel and Vauxhall brands, which it bought from General Motors in August 2017.
Tier 1 suppliers run the risk of being squeezed out of the European market
The announcement serves a blow to PSA Groupe’s current traction motor suppliers Continental and Valeo Siemens eAutomotive – both of which will provide motors for PSA’s 2019 lineup of electrified vehicles, but face uncertainty in the years thereafter.
With most European automakers showing a partiality for in-house motor development and manufacturing, Tier 1 suppliers that don’t find themselves in a JV with an automaker run the risk of being squeezed out as the European market evolves.
PSA projects that the market for electric vehicle traction motors will double by 2030 to €45 billion (US $56.1 billion) and acquisitive and opportunistic Nidec is positioning itself to become a force majeure in Europe.
Actively developing automotive business unit
Nidec, which produces motors for hard disk drives, elevators, and “everything that spins and moves” has been actively developing a new business growth platform in recent years with a focus on automotive applications.
In November 2017 Nidec acquired German electronic control unit manufacturer driveXpert, and earlier in the year acquired France’s leading electric motor manufacturer, Leroy-Somer, from Emerson Electric. Interestingly, Leroy-Somer has been the traction motor supplier of French electric vehicle manufacturer Bolloré since 2011, and since 2015, Bolloré’s electric cars have been manufactured by Renault in Dieppe, France.
Given that Renault and PSA ended a cross-sharing production alliance in 2013, we believe the recently-announced PSA – Nidec JV casts a cloud of uncertainty over Bolloré’s supply chain and could result in future Bolloré models using traction motors manufactured by Renault instead.
Bucking the trend set by other major automakers in Europe
The JV between Nidec and PSA largely bucks the trend set by other European electric vehicle manufacturers in recent years that have predominantly manufactured traction motors in-house. For example, BMW and Renault produce traction motors in-house, and VW is planning to produce its own motors for vehicles using its upcoming MEB platform.
The Nidec and PSA announcement follows in the footsteps of a similar JV established by Bosch and Daimler in 2011, called EM-motive, and a more recent JV established by Hitachi and Honda in early-2017.
According to the Nikkei Asian Review, Nidec believes the time is right “for specialized parts suppliers to take over and capitalize on economies of scale”. According to Nidec, because the company is “very cost-competitive” it is “absolutely going to win on cost” as the electric vehicle market grows.
Partnership will bridge competences, boost economies of scale, and help PSA Groupe navigate supply risks
The Nidec PSA Groupe JV will bridge the duo’s competences and boost respective economies of scale as electric vehicle sales continue to grow. By 2023 PSA plans to offer an electrified powertrain variant for 80% of the models it manufacturers.
The JV will also help PSA Groupe navigate potential motor metals supply risks since Nidec brings to the table long-standing supplier relationships with neodymium-iron-boron (“NdFeB”) magnet manufacturers and distributors in China and Japan.
With plans to produce some 900,000 traction motors in 2022 alone, the JV is poised to rapidly become France’s largest consumer of high-grade NdFeB.
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