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A Solid Power engineer holds two solid-state battery cells made for BMW and Ford at a U.S. pilot production line in April. Global carmakers are upping their bets on solid-state battery technology.      © Reuters
Business Spotlight

Can Japan and Toyota win the solid-state battery race?

Rivals are also chasing an EV breakthrough to take on Tesla

ERI SUGIURA, Nikkei staff writer | Japan

TOKYO/OSAKA -- In the race to produce the next generation of advanced batteries for electric vehicles, Japan Inc.'s rivals are gathering.

Toyota Motor, the world's biggest car producer in 2020, has long been considered a front-runner to produce a commercially viable solid-state battery -- which would be more stable and faster to charge than the lithium-ion batteries used today by carmakers from Tesla of the U.S. to China's BYD. Toyota plans to announce a prototype of a car powered by a solid-state battery by the end of the year, seeking to launch a vehicle in the early 2020s.

But Germany's Volkswagen, whose sales narrowly trailed Toyota's in 2020, is at its heels. This year the German carmaker increased its investment in QuantumScape, a U.S. startup aiming to produce a solid-state battery. QuantumScape -- backed by Bill Gates and with a market capitalization of almost $11 billion -- said on May 14 that it and VW would decide this year where to build a pilot line for their joint venture to produce batteries. The aim is to establish a production line by 2024, allowing VW to launch EVs with the batteries the following year.

With electric vehicles established as a key part of global efforts to reach net zero carbon emissions, other automakers are raising their bets on advanced battery technology.

Ford Motor this month added to its investment in solid-state battery startup Solid Power. BMW is also joining the U.S. carmaker in the latest $130 million funding round, as the startup plans to supply these automakers with large-format cells for vehicle testing in 2022.

Toyota Motor's bZ4X Concept electric vehicle at the Auto Shanghai show in China in April. Toyota is aiming to launch 15 EVs by 2025.   © Reuters

In January, Chinese automaker Nio said its new sedan in 2022 will have solid-state batteries able to hit a 1,000-km range -- though many believe that Nio's planned battery may be half-solid and half-liquid rather than all solid-state. And South Korea's Hyundai Motor said in a conference call last month that it would mass-produce EVs powered by solid-state batteries by 2030.

"We don't think that any cell producer or carmaker is not looking at solid state batteries right now. ... The technology is just too hot to ignore it," Christoph Neef, senior scientist at Germany-based Fraunhofer Institute for Systems and Innovation Research ISI, told Nikkei Asia.

The intensifying global race is a challenge for Japan. China and South Korea rapidly eroded the country's dominance of the market for lithium-ion batteries. Determined to avoid a repeat, Japan's government is spearheading the commercialization of the latest battery technology.

The New Energy and Industrial Technology Development Organization, known as NEDO, a public-sector body, is delegating a project to the Consortium for Lithium Ion Battery Technology and Evaluation Center headed by Nobel Prize winning chemist Akira Yoshino. Carmakers including Toyota, Honda Motor and Nissan Motor, as well as battery manufacturers, chemicals companies and universities are receiving NEDO funds and accumulating know-how under the leadership of Libtec.

"For Japan to lead the way with solid-state batteries, we must expand the scope of research," said Mikinari Shimada, who manages Libtec's solid-state battery research.

Solid-state batteries are a type of lithium ion battery but differ in key respects. Instead of a flammable liquid they contain thin layers of solid electrolytes through which ions travel. The electrolytes also work as the battery's separator, a key component in a lithium-ion battery, cutting fire risk and the amount of raw materials needed.

Because solid-state batteries have greater energy density, they pack more of a punch for the same weight, allowing carmakers to extend the range of an EV or deliver smaller and cheaper batteries for the same range. They can also recharge faster as there is no need to consider the risk of heat generation from charging at high power.

As an example, VW says its batteries with QuantumScape will give about 30% more range than a liquid-type battery of the same size and weight, and charge to 80% capacity in as little as 12 minutes -- about half the time required by the fastest liquid-type batteries in use today.

"Higher voltage would contribute to a vehicle's efficiency," said Kiyoshi Kanamura, a professor at Tokyo Metropolitan University who specializes in batteries, adding that stacking multiple lithium-ion batteries would risk the batteries catching fire. "But solid-state batteries are basically incombustible, and compressing them reduces their volume by about half in my calculation. Car manufacturers are first and foremost seeking to have that advantage," he said.

Mikinari Shimada, who leads solid-state battery research at Japan's Consortium for Lithium Ion Battery Technology and Evaluation Center. (Photo by Atsushi Ooka)

Carmakers' pursuit of low cost and high performance in batteries has become a "core competency of their business going forward, just as engines and transmissions have been in the past," said Sam Abuelsamid, principal analyst at U.S.-based research company Guidehouse Insights.

One outlier in the quest for solid-state batteries is Tesla, the best-known EV producer. CEO Elon Musk has remained silent on solid-state batteries but suggested the carmaker is worried about nickel availability for the current generation of lithium-ion batteries.

Toyota has pursued a next-generation battery for over a decade, making the largest number of patent applications for solid-state batteries from 2014 to 2018, according to a report by the European Patent Office and the International Energy Agency. Toyota vowed at an earnings conference on May 12 to sell 8 million electrified vehicles in 2030, with fuel-cell vehicles and EVs accounting for a quarter.

In April 2020 Toyota established Prime Planet Energy & Solutions, a joint venture with Panasonic to develop vehicle batteries, with a focus on solid-state batteries.

"A company like Toyota will have some advantages since they have been doing the R&D in-house for quite some time, and might also already have an idea about how their supply chain might look," said Neef, the Fraunhofer scientist. He added that Toyota's research efforts appear "promising."

However, Toyota says it faces challenges. "Technical hurdles are still high," Masahiko Maeda, Toyota's chief technology officer, told reporters at the earnings conference on May 12. "We are now currently developing materials that can meet safety and durability requirements."

Honda, under new CEO Toshihiro Mibe, is also stepping up research into all-solid-state batteries. Mibe said in April that the company would start a demonstration line this fiscal year and aims to make solid-state batteries available for new models in the second half of the 2020s. Nissan is also looking to sell vehicles equipped with the next-generation battery in the late 2020s.

One difficulty in building solid-state batteries is securing sufficient contact between solid electrolytes and positive and negative electrodes, something easily done in a conventional liquid battery where the electrolytic solution fills the gap between the electrodes. Some people say hand-crafting is still the most efficient way to apply adequate pressure to the materials and make sure they are stuck closely together.

"The big problem with [the] solid-state cell remains manufacturability," Abuelsamid said. "No one has yet been able to scale up production to automotive requirements." Abuelsamid doesn't expect to see any volume applications until 2025 and beyond.

Neef also expressed doubts over how quickly solid-state technology can develop.

Japan's Lithium Ion Battery Technology and Evaluation Center. "For Japan to lead ... we must expand the scope of research," says the head of its solid-state battery project.(Photo by Atsushi Ooka)

"Our feeling is that the best solid-state technology, meaning the best combination of materials and components, has not been found or selected yet," he said. "Most prototypes were made in the lab rather than on a pilot line using automated and large-scale compatible processes."

He added that he expects commercialization to come toward 2030.

Libtec's Shimada says the solid-state team has developed batteries with an energy density comparable to that of existing EVs, which use liquid electrolytes, allowing a similar range. The batteries can also be recharged from zero to 80% full at 60 C in 10 minutes.

The program will also examine new materials for next-generation solid-state batteries, with the aim of achieving a range comparable to that of current gasoline-powered vehicles.

Spurring the program forward is Japan's declining presence in the lithium-ion battery market.

Japanese market research company Techno System Research says China and South Korea accounted for more than 70% of total shipments of automotive batteries in 2020. China's Contemporary Amperex Technology, or CATL, held a 26% share, and LG Chem controlled 23%. Panasonic, which produces batteries for Tesla, was the only Japanese maker in the top seven -- a stark contrast to 2013 when Japan Inc. had over 50% of the market.

Shimada, who used to work at Panasonic, says there has been an outflow of manufacturing knowledge, equipment and engineers from Japan. And rival countries are catching up even in solid-state batteries.

NEDO says Japan accounted for 37% of over 9,400 patents applied globally from 2001 through 2018, exceeding China's 28% and the U.S.'s 16%, but that China has been applying for more patents than Japan every year since 2016. "It is highly likely that China will overtake Japan in the future," the organization concludes.

Despite governmental efforts, experts question whether Japan can become a hub for building solid-state batteries for electric cars.

"Even with a shift to solid-state cells, batteries will remain large and heavy," Abuelsamid said. "As EV production increases, automakers and suppliers are increasingly shifting to localized production of cells, modules and battery packs to save on transportation costs and support just-in-time production."

Neef said local demand is more likely to attract large-scale battery production. In Europe, for example, CATL is constructing a plant in Germany to serve the EV market. Although he believes Japan is "very strong with respect to battery R&D," the low penetration of EVs in Japan could be a disadvantage to Japan in its quest to become a large location for solid-state battery manufacturing.

Japan is the world's largest market for electrified cars. But the term here refers mostly to hybrids. Pure EVs in 2019 accounted for 2% of the Japanese market, according to the same EPO-IEA report that cites Toyota as the patent application leader. This is partly due to carmakers like Toyota placing early bets on hybrid technology.

"Japan's leadership in battery technology has not translated into a large domestic electric car market," the report warns. This may need to change quickly if the country is to fulfill its solid-state ambitions.

"The market is expecting Toyota to make a clear statement that the company will fully tackle EVs if it goes on with the development of solid-state batteries," argued Seiji Sugiura, a senior analyst at Tokai Tokyo Research Institute. Many consider that Toyota's promise to launch 25% of its new electrified cars as EVs and FCVs by 2030 is too unambitious: Volkswagen, for example, aims for EVs to be 70% of sales in Europe by the same year.

Still, says Sugiura, Toyota might have made the right call.

"Its rivals in North America and Europe are rushing to launch EVs. But Toyota's strategy [of not following such a move] allows the automaker to buy some time and focus on developing and mass-producing solid-state batteries," Sugiura said. "A breakthrough is more likely to happen for solid-state batteries."

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