WEBVTT - When Mines Are Hedges, Cars Get Cheaper

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<v Speaker 1>Hi everyone. A lot of PNIF clients are strategists. They

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<v Speaker 1>wear many hats, but put simply, they are responsible for

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<v Speaker 1>understanding current and future market conditions to help guide the

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<v Speaker 1>direction of their companies in the near and long term.

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<v Speaker 1>They do analysis, they make recommendations, and to do this

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<v Speaker 1>they need data. So a bit of context. As I

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<v Speaker 1>mentioned before, I run the product for BNF, So what

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<v Speaker 1>that means is my team and I look after the

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<v Speaker 1>delivery of enough content, data and tools across PF dot com,

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<v Speaker 1>the be Enough mobile app, and the Bloomberg terminal. As

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<v Speaker 1>part of this, I do a lot of client interviews.

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<v Speaker 1>In these interviews, I often ask the question what data

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<v Speaker 1>set do you need most? Well, the answers vary, but

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<v Speaker 1>the first answer is almost always p p A prices

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<v Speaker 1>or prices for power purchase agreements, but a close second

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<v Speaker 1>is battery prices. Batteries for stationary storage are a compliment

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<v Speaker 1>to wind and solar power, and of course they're critical

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<v Speaker 1>for electric vehicles. To make recommendations on anything having to

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<v Speaker 1>do with these areas, strategists need to know price now

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<v Speaker 1>and what it's expected to be in the future. Today

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<v Speaker 1>we'll talk with James Frith, who leads our coverage of

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<v Speaker 1>the battery supply chain about our latest annual battery price

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<v Speaker 1>survey and report titled nineteen Lithium Iron Battery Price Survey.

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<v Speaker 1>Being if users can find this report on BNF dot com,

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<v Speaker 1>the BENF mobile app, and the Bloomberg terminal. As a reminder,

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<v Speaker 1>Being does not provide investmentis strategy advice, and you can

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<v Speaker 1>hear a full disclaimer at the end of the show.

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<v Speaker 1>I'm Mark Taylor here with Dana Perkins, and you're listening

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<v Speaker 1>to Switch It on the BENF podcast. Hey James, Hey Mark,

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<v Speaker 1>Hey Dana, thanks for coming in. Can you start us

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<v Speaker 1>off with a bit about why we started doing the

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<v Speaker 1>battery price survey, how we do it and what clients

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<v Speaker 1>are you using it for? Yeah, definitely, I mean I

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<v Speaker 1>think the battery price survey is key to a lot

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<v Speaker 1>of the work that we do at Bloomberg any F.

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<v Speaker 1>If you look at, for example, electric vehicles, right, what

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<v Speaker 1>people always want to know is when can I get

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<v Speaker 1>in the EVA? It's too expensive at the moment. One

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<v Speaker 1>of the underlying you know, factors about the cost competitiveness

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<v Speaker 1>of electric vehicles is how much does the battery cost?

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<v Speaker 1>And so what's the price of the battery in that

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<v Speaker 1>e V and so that's kind of one of the

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<v Speaker 1>main drivers for doing the battery price survey. On top

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<v Speaker 1>of that, you then have things like stationary storage, which

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<v Speaker 1>you know, I don't go home and talk to my

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<v Speaker 1>family about staciary storage. They don't ask me about that

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<v Speaker 1>part of the job. But again, lots of our clients

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<v Speaker 1>are super interested in that stationary storage will enable the

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<v Speaker 1>next kind of build out of renewable energy generation, will

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<v Speaker 1>help to avoid curtailment. And again one of the key

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<v Speaker 1>factors there is what's the cost or the price of

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<v Speaker 1>batteries going into those systems. How about consumer electronics, I mean,

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<v Speaker 1>consumer electronics have been really important for getting to where

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<v Speaker 1>we are today. It's in actually that electric vehicles overtook

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<v Speaker 1>consumer electronics is the largest demand area for lifting mind batteries.

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<v Speaker 1>Before that, it was always consumer electronics. But there's a

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<v Speaker 1>slight difference between what you see in the EV market

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<v Speaker 1>and what you see in the consumer electronics market. Right

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<v Speaker 1>for evs, as I said, at the moment, it's really

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<v Speaker 1>about reducing that price, whereas for a consumer electronics the

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<v Speaker 1>price isn't as important. Your iPhone probably costs thousand pounds

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<v Speaker 1>more than that. Nowadays, the battery is a small proportion

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<v Speaker 1>of that. If they go for a slightly more expensive battery,

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<v Speaker 1>you're not necessarily gonna notice that. But with e v

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<v Speaker 1>S it's the opposite. They're trying to get battery prices

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<v Speaker 1>down as far as possible to make the cost of

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<v Speaker 1>the v better. So the price of the batteries the

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<v Speaker 1>press of the car. Yes, I mean, like I mean,

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<v Speaker 1>the biggest factor in that, exactly. Okay, So let's talk

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<v Speaker 1>about the survey just a little bit, some basics around it.

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<v Speaker 1>The units for the price of the battery is dollars

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<v Speaker 1>per megawatt hour. Can you explain why that is? Yeah, definitely,

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<v Speaker 1>And I guess a lot of the listeners on this

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<v Speaker 1>who are used to working with renewables will be thinking

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<v Speaker 1>in dollars per megawatt or if they hear kind of

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<v Speaker 1>dollars per killer what our megawat our will think of

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<v Speaker 1>l c oes. But it's slightly different for a battery, right,

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<v Speaker 1>if you have wind or solar, you're talking about the

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<v Speaker 1>maximum amount of power that you can generate at any

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<v Speaker 1>one time, So that's your megawat's For batteries, it's more

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<v Speaker 1>about how much energy you can store. So it's a

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<v Speaker 1>mega what hours how long can you store that megawat for?

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<v Speaker 1>If you have one with more mega what hours in there,

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<v Speaker 1>it's essentially a greater driving range. And so it's really

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<v Speaker 1>about how much you're bringing down the cost of storing

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<v Speaker 1>that energy rather than the cost of kind of producing

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<v Speaker 1>that power. There are some applications where that is slightly different.

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<v Speaker 1>So for hybrid electric vehicles, not ones where you have

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<v Speaker 1>a plug, you know, just your tyre to preer type

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<v Speaker 1>of thing. Actually, they're a lot of people think of

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<v Speaker 1>in dollars per killer what but for battery electric vehicles,

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<v Speaker 1>for stationary storage, for plug in hyrod electric vehicles, it's

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<v Speaker 1>dollars per kilar what hour that everyone's interested in. And

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<v Speaker 1>that's the kind of key metrics go with For sell manufacturers,

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<v Speaker 1>a lot of money goes into this innovation. It's a

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<v Speaker 1>pretty competitive space. How much money do they spend on

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<v Speaker 1>this and how much work really goes into it. Yeah,

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<v Speaker 1>So I mean if you look at the big manufacturers

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<v Speaker 1>working on this, it ends up being about seven per

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<v Speaker 1>cent of their spending each year. Right, They're putting massive

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<v Speaker 1>amounts of money into this, and there's a number of

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<v Speaker 1>different kind of areas that they're focusing on. As I've mentioned,

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<v Speaker 1>kind of price or cost is key thing. They're trying

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<v Speaker 1>to reduce that cost of manufacturing that battery and reduce

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<v Speaker 1>the kind of price that you're selling it out. But

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<v Speaker 1>there's also lots of kind of performance characteristics that are

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<v Speaker 1>becoming increasingly important. Right, So the number of cycles that

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<v Speaker 1>your battery can do is one of the key ones

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<v Speaker 1>as well. You want to have a cheap battery, but

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<v Speaker 1>if it can only last three years and then your

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<v Speaker 1>new EVS dead, that's not going to work, right, So

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<v Speaker 1>it has to have a long cycle life as well,

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<v Speaker 1>it has to have high safety, and increasingly, as the

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<v Speaker 1>pricey batteries come down and we reach price parity between

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<v Speaker 1>electric vehicles and internal question engines, we expect that manufacturers

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<v Speaker 1>will start optimizing for some of these other metrics. So

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<v Speaker 1>one of the key ones that we've already seen announcements

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<v Speaker 1>around is Daimler their next range of EVS EQ range.

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<v Speaker 1>They want to have carbon neutral batteries. Now that's potentially

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<v Speaker 1>going to cost a bit more money than just a

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<v Speaker 1>normal battery, but because they're kind of vehicles are slightly

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<v Speaker 1>higher end, they're reaching price parity earlier, they can start

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<v Speaker 1>optimizing the other metric. How does that work? What is

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<v Speaker 1>a carbon neutral battery? That's a good question. So they

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<v Speaker 1>haven't come out and explained how they're going to do

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<v Speaker 1>that yet. I imagine for the actual manufacturing of the

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<v Speaker 1>batteries themselves, you'll be looking at renewable energy p p

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<v Speaker 1>a s as you mentioned earlier, but they will also

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<v Speaker 1>have to be some carbon offsetting. If you're shipping in

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<v Speaker 1>lithium from South America or Australia at the moment, you

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<v Speaker 1>can't get electric shipping green shipping, so you're gonna have

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<v Speaker 1>to offset some CEO two somehow. We did an episode

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<v Speaker 1>a while back with you and Logan Goldie Scout where

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<v Speaker 1>we already explored the concept of low emissions evs that

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<v Speaker 1>they are actually lower emissions than the internal combustion engine

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<v Speaker 1>vehicles even if plugged into a cold red exactly. So

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<v Speaker 1>if anybody out there wants to go listen to that,

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<v Speaker 1>you can find it where if you listen to our podcast.

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<v Speaker 1>Can we go back to the price itself? So you've

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<v Speaker 1>mentioned lat year in the survey that it went down

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<v Speaker 1>right down to what was the number last year six

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<v Speaker 1>dollars pecular in twenty nineteen, okay, and then before that

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<v Speaker 1>it was an eighteen percent drap, and the year before

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<v Speaker 1>that it was a twenty six percent trap. So that

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<v Speaker 1>seems to be less and less every year. Are we

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<v Speaker 1>reaching a floor? Is there a floor? Has it work? Yeah?

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<v Speaker 1>So it's an interesting question again, and it's not that

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<v Speaker 1>there's a floor, it's that it's an ascent type. So

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<v Speaker 1>what we're seeing the way we look at battery prices

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<v Speaker 1>is we use what we call an experience model experience

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<v Speaker 1>curve to model the price declines um and that tells

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<v Speaker 1>us that every time the cumulative volume of batteries deployed

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<v Speaker 1>into the market doubles prices for by eighteen percent, So

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<v Speaker 1>we have what we call an eighteen percent learning rate.

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<v Speaker 1>And what you're seeing year on year is that actually

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<v Speaker 1>to double the number of batteries on the market becomes

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<v Speaker 1>that little bit harder. So actually, although our learning rate

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<v Speaker 1>is still eighteen percent, year on year, decreases might not

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<v Speaker 1>be as high because you know, rather than doubling the

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<v Speaker 1>number of batteries deployed, actually you're only increasing it by

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<v Speaker 1>one point eight times or one point six times, etcetera.

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<v Speaker 1>And when you do your survey. It's target to people, right,

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<v Speaker 1>you're asking people at their prices. Are you finding that

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<v Speaker 1>the numbers they give you match your learning rate? Yes?

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<v Speaker 1>So another good question, and this is one that we

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<v Speaker 1>always get challenged on. Well, firstly, do we trust the

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<v Speaker 1>answers that we're being that we're being given you? And yeah,

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<v Speaker 1>we do. So. One of the things that we do

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<v Speaker 1>is we're not just talking to the automakers asking them

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<v Speaker 1>how much they're buying batteries for. We're also talking to

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<v Speaker 1>the cell manufacturers or the pack manufacturers as well, asking

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<v Speaker 1>them how much they're setting for. And thankfully, both of

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<v Speaker 1>these numbers tend to match up each year, which is good.

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<v Speaker 1>But yeah, so the kind of answers that they're giving

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<v Speaker 1>us and what we've seen in over the last three

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<v Speaker 1>or four years does match up with that eighteen percent

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<v Speaker 1>learning rate. Some years it's slightly higher, some years it's

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<v Speaker 1>a little bit lower, but in general it is sticking

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<v Speaker 1>to that. So, you're a battery manufacturer, what does it

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<v Speaker 1>take to be successful in this space and to be competitive?

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<v Speaker 1>Because you can pour all the R and D that

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<v Speaker 1>you want in there, but you've got to know what

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<v Speaker 1>you're looking for. And trying to optimize. Yeah. I mean,

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<v Speaker 1>there's a couple of things that I think are kind

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<v Speaker 1>of key to being successful. One is having a name

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<v Speaker 1>that people trust. And this is something that we've seen

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<v Speaker 1>a couple of times. You know, in the stationary storage industry.

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<v Speaker 1>For example, if you go and talk to developers and

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<v Speaker 1>you asked them, you give them a list of battery

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<v Speaker 1>manufacturers and you know, say the top twenty manufacturers based

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<v Speaker 1>on capacity, and you asked them how many of them

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<v Speaker 1>are viewed as being bankable. Actually you come away with

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<v Speaker 1>kind of four or five top tier ones where people say, actually,

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<v Speaker 1>all of these are bankable. And then as you go

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<v Speaker 1>down the list, you know, that starts to waiver with

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<v Speaker 1>some people saying I'm not sure about this manufacturer. So

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<v Speaker 1>that trust presumably is built up over time. But this

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<v Speaker 1>is reasonably new technology. So how do they earn that trust?

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<v Speaker 1>I guess. Yeah, there's definitely some first move advantage in

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<v Speaker 1>their right and working with these companies getting in their

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<v Speaker 1>early securing orders from them, providing those batteries, and showing

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<v Speaker 1>that actually, over the you know, the last ten years,

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<v Speaker 1>their batteries have performed as they've said they would, and

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<v Speaker 1>that is really key, and there's a number of companies

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<v Speaker 1>that are there that are trustworthy. We published are tier

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<v Speaker 1>list for battery manufacturers last year, and you have companies

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<v Speaker 1>up there that are you know, at the top, like

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<v Speaker 1>c at L from China, LG Chem from South Korea.

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<v Speaker 1>You also have Samsung, sdi sk Innovation from Korea, as

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<v Speaker 1>well as companies like you know, Tesla Panasonic obviously, who

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<v Speaker 1>are one of the largest manufacturers out there. One of

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<v Speaker 1>the things in the note that really struck me was

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<v Speaker 1>a line you had about automakers skipping the middleman for

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<v Speaker 1>now these trusted manufacturers you just mentioned and going straight

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<v Speaker 1>to commodity suppliers and securing supply of these battery materials,

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<v Speaker 1>and then they go back to the manufacturer and asking

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<v Speaker 1>to make the batteries with those materials. Is that right? Yeah,

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<v Speaker 1>So that's right. So we I say, we got ourselves

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<v Speaker 1>into a situation. The industry got itself into this situation

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<v Speaker 1>two or three years ago where commodity prices suddenly hiked,

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<v Speaker 1>you know, particularly lithium and cobalt. And back then what

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<v Speaker 1>was happening was your battery manufacturer, your c at L,

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<v Speaker 1>your LG CHM, they would buy the materials from the

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<v Speaker 1>miners and they would build the batteries, but they would

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<v Speaker 1>have agreed a price with the automaker, but suddenly they

0:11:06.800 --> 0:11:09.679
<v Speaker 1>found that actually the material prices were skyrocketing, so they

0:11:09.720 --> 0:11:11.880
<v Speaker 1>had to pass that price onto the automaker, and the

0:11:11.880 --> 0:11:14.280
<v Speaker 1>automaker suddenly found that their battery cells were much more

0:11:14.280 --> 0:11:17.640
<v Speaker 1>expensive than they were originally told. So now to try

0:11:17.720 --> 0:11:22.760
<v Speaker 1>and um provide themselves with a bit more transparency on

0:11:22.800 --> 0:11:26.000
<v Speaker 1>what's going to happen to material prices. Automakers are going

0:11:26.040 --> 0:11:29.360
<v Speaker 1>directly to the miners, signing contracts with them that are

0:11:29.520 --> 0:11:34.440
<v Speaker 1>generally reviewed every six months and adjusted based on spot prices.

0:11:34.440 --> 0:11:38.160
<v Speaker 1>But by doing that, by securing that material, it means

0:11:38.200 --> 0:11:43.480
<v Speaker 1>that the automakers can um hedge for material price changes, right,

0:11:43.480 --> 0:11:46.800
<v Speaker 1>so they're not at risk of kind of suddenly prices Hikings,

0:11:46.840 --> 0:11:49.040
<v Speaker 1>you're saying, it's not just transparency on their balance sheet,

0:11:49.040 --> 0:11:50.920
<v Speaker 1>but it's actually are they getting better prices than the

0:11:50.920 --> 0:11:53.960
<v Speaker 1>battery manufacturers themselves were getting. I wouldn't say that they're

0:11:53.960 --> 0:11:57.560
<v Speaker 1>necessarily getting better prices. You know, there certainly could be

0:11:57.600 --> 0:12:00.440
<v Speaker 1>an advantage if you're a company like VW and suddenly

0:12:00.440 --> 0:12:04.520
<v Speaker 1>you're buying material for your entire product line. Well, they've

0:12:04.520 --> 0:12:07.200
<v Speaker 1>got a big order, but the battery manufacturers are going

0:12:07.240 --> 0:12:09.600
<v Speaker 1>to have an even bigger order, right because they're going

0:12:09.640 --> 0:12:12.000
<v Speaker 1>to have all those from the w and then all

0:12:12.000 --> 0:12:14.600
<v Speaker 1>of the other man there are the other companies that

0:12:14.640 --> 0:12:17.600
<v Speaker 1>they're buying for. So I would think that that would

0:12:18.160 --> 0:12:21.400
<v Speaker 1>add some economic benefit. But you're saying, actually the automakers

0:12:21.400 --> 0:12:24.360
<v Speaker 1>want to go direct. I mean, there probably is some

0:12:24.400 --> 0:12:26.640
<v Speaker 1>economic benefit, as you say, you know you've got these

0:12:26.640 --> 0:12:30.920
<v Speaker 1>massive orders, but there's also some uncertainty there as well

0:12:30.960 --> 0:12:34.240
<v Speaker 1>for the battery manufacturer. Right, So if I'm a big

0:12:34.280 --> 0:12:36.880
<v Speaker 1>automaker and I go to the battery cell manufacturing, I say,

0:12:36.920 --> 0:12:38.920
<v Speaker 1>next year, I'm gonna sell a million a million e

0:12:39.000 --> 0:12:42.840
<v Speaker 1>vis um, And then next year comes around and actually

0:12:43.040 --> 0:12:46.080
<v Speaker 1>I'm decided that I'm going to slash that output because

0:12:46.160 --> 0:12:49.080
<v Speaker 1>the market is not there yet. But the battery manufacturer

0:12:49.080 --> 0:12:51.560
<v Speaker 1>has already gone and ordered all that raw material. Suddenly

0:12:51.559 --> 0:12:53.280
<v Speaker 1>he's left with the stockpile of stuff that he can't

0:12:53.320 --> 0:12:56.199
<v Speaker 1>get rid of. So actually for the battery manufacturer themselves

0:12:56.280 --> 0:12:58.600
<v Speaker 1>as well, it makes sense for them to then shift

0:12:58.679 --> 0:13:02.400
<v Speaker 1>that onto the auto maker. So we've seen the commodities

0:13:02.440 --> 0:13:06.760
<v Speaker 1>are an important part of the consideration in terms of

0:13:06.800 --> 0:13:08.360
<v Speaker 1>what goes into the cost. But there are a lot

0:13:08.360 --> 0:13:11.120
<v Speaker 1>of things to think about. So when we're looking at

0:13:11.280 --> 0:13:14.040
<v Speaker 1>pack prices, and this is something that actually comes up.

0:13:14.080 --> 0:13:17.480
<v Speaker 1>We have a battery cost model which your teammate, and

0:13:17.760 --> 0:13:20.200
<v Speaker 1>in there it says that you know, we can theoretically

0:13:20.200 --> 0:13:23.600
<v Speaker 1>extrapolate out what the actual prices at the end if

0:13:23.640 --> 0:13:26.080
<v Speaker 1>you take into consideration a couple of things. Could you

0:13:26.120 --> 0:13:30.160
<v Speaker 1>go into detail what those different components are that ultimately

0:13:30.160 --> 0:13:32.680
<v Speaker 1>come up with the final price that you the vehicle

0:13:32.679 --> 0:13:36.120
<v Speaker 1>manufacturer end up seeing. Yeah, definitely. So if we look

0:13:36.120 --> 0:13:38.560
<v Speaker 1>at the pack itself, so that's the pack prices what

0:13:38.600 --> 0:13:40.680
<v Speaker 1>I mentioned earlier, that hundred and fifty six dollars per

0:13:40.760 --> 0:13:44.520
<v Speaker 1>killer one hour, that's what it's being sold for. What

0:13:44.640 --> 0:13:46.720
<v Speaker 1>you then have to consider if you're a battery manufacturer,

0:13:46.760 --> 0:13:48.439
<v Speaker 1>you then have to take off the kind of soft

0:13:48.480 --> 0:13:50.920
<v Speaker 1>costs associated with that, so your sales and marketing, your

0:13:51.040 --> 0:13:54.040
<v Speaker 1>R and D expenditure, um your margin as well. And

0:13:54.080 --> 0:13:56.560
<v Speaker 1>that's kind of I think has been a hotly debated

0:13:57.480 --> 0:13:59.800
<v Speaker 1>topic over the last couple of years. But maybe we'll

0:13:59.800 --> 0:14:01.959
<v Speaker 1>come after that in a minute. Um, So if you

0:14:02.000 --> 0:14:04.080
<v Speaker 1>take off those kind of soft costs. What you're left

0:14:04.120 --> 0:14:07.560
<v Speaker 1>with is the material and the manufacturing costs, right, and

0:14:07.600 --> 0:14:11.319
<v Speaker 1>that can be split into the materials and manufacturing costs

0:14:11.360 --> 0:14:14.920
<v Speaker 1>of producing your the pack, and that accounts for about

0:14:15.320 --> 0:14:18.360
<v Speaker 1>the total cost roughly um And then within that or

0:14:18.640 --> 0:14:20.520
<v Speaker 1>kind of beneath that, you have the cell costs, and

0:14:20.520 --> 0:14:23.600
<v Speaker 1>the cell accounts for about the total cost of a

0:14:23.600 --> 0:14:27.240
<v Speaker 1>battery pack. And then again linking back to the commodities,

0:14:27.640 --> 0:14:31.080
<v Speaker 1>actually within that cell, about overt of those costs are

0:14:31.680 --> 0:14:35.160
<v Speaker 1>down to the materials going into that. So that's not

0:14:35.200 --> 0:14:38.200
<v Speaker 1>necessarily just the cathode active materials. There's other materials like

0:14:38.240 --> 0:14:42.640
<v Speaker 1>the current collectors, the cell housing, the connecting wires, etcetera.

0:14:42.720 --> 0:14:47.240
<v Speaker 1>But materials are a big, big cost input for battery

0:14:47.240 --> 0:14:50.120
<v Speaker 1>cells and packs. Okay, I've got to know why our

0:14:50.160 --> 0:14:52.640
<v Speaker 1>margins hardly debated. These companies are all in business to

0:14:52.640 --> 0:14:55.120
<v Speaker 1>make money. Yeah, they're in business to make money. And

0:14:55.160 --> 0:14:57.520
<v Speaker 1>the question is are they making money? And that's the

0:14:57.600 --> 0:15:01.120
<v Speaker 1>question that we always get, um you know, particular when

0:15:01.160 --> 0:15:04.040
<v Speaker 1>people see how low battery prices are and how they

0:15:04.040 --> 0:15:07.120
<v Speaker 1>can keep declining. We always get that question, how companies

0:15:07.200 --> 0:15:08.800
<v Speaker 1>making money? Here? And there's a couple of you know,

0:15:08.840 --> 0:15:10.440
<v Speaker 1>there's a couple of different areas to touch on here.

0:15:10.800 --> 0:15:13.480
<v Speaker 1>One is that actually using our bottom up cost model

0:15:13.480 --> 0:15:16.840
<v Speaker 1>that you mentioned earlier, when we do that calculation, we

0:15:16.920 --> 0:15:20.160
<v Speaker 1>find that depending on the level of R and D

0:15:20.280 --> 0:15:24.920
<v Speaker 1>investment that manufacturers are putting in their sales and marketing expenditure, etcetera,

0:15:25.600 --> 0:15:28.400
<v Speaker 1>they can be making up to about fifteen cent margin

0:15:28.640 --> 0:15:30.840
<v Speaker 1>on the battery packs that they're setting into the market.

0:15:31.240 --> 0:15:34.120
<v Speaker 1>So that's one consideration the can be margins are made

0:15:34.160 --> 0:15:35.880
<v Speaker 1>there depending what your investment is in your R and

0:15:35.960 --> 0:15:38.840
<v Speaker 1>D expenditure, etcetera. But the other one is that they're

0:15:38.840 --> 0:15:41.760
<v Speaker 1>not just selling batteries into the battery electric vehicle market.

0:15:41.840 --> 0:15:43.840
<v Speaker 1>There are lots of other industries out there. There's a

0:15:43.840 --> 0:15:47.000
<v Speaker 1>commercial electric vehicle market, there's a stationary storage market, which

0:15:47.280 --> 0:15:51.520
<v Speaker 1>we mentioned earlier. There's even things like commercial shipping market

0:15:51.600 --> 0:15:55.920
<v Speaker 1>right adding batteries to ships crossing Fiords in Norway. And

0:15:56.000 --> 0:15:58.720
<v Speaker 1>in a lot of these other areas you know, particularly

0:15:58.720 --> 0:16:03.200
<v Speaker 1>commercial and stationary store ridge, the cost of battery packs

0:16:03.280 --> 0:16:06.000
<v Speaker 1>or racks going into those are much higher than they

0:16:06.000 --> 0:16:09.760
<v Speaker 1>are for battery electric vehicles, and in those markets there's

0:16:09.880 --> 0:16:14.240
<v Speaker 1>more of an ability for manufacturers to play with those margins.

0:16:14.320 --> 0:16:16.280
<v Speaker 1>The reason they can do that is because the orders

0:16:16.360 --> 0:16:19.000
<v Speaker 1>tend to be slightly smaller in those markets, so the

0:16:19.120 --> 0:16:22.840
<v Speaker 1>person buying the battery racks doesn't have the same negotiating

0:16:22.840 --> 0:16:26.120
<v Speaker 1>power is say a large automaker who's ordering kind of

0:16:26.680 --> 0:16:29.840
<v Speaker 1>multiple giggle, what hours the batteries each year. So as

0:16:29.840 --> 0:16:32.320
<v Speaker 1>the activity you're seeing in the sector translating the type

0:16:32.320 --> 0:16:36.480
<v Speaker 1>of margins and falling battery prices, is that translating to

0:16:36.920 --> 0:16:40.760
<v Speaker 1>expansion or consolidation in the sectory? Yeah, another really interesting one,

0:16:40.760 --> 0:16:42.120
<v Speaker 1>and I think it's a bit of both at the moment.

0:16:42.160 --> 0:16:44.720
<v Speaker 1>So we definitely have Um, we're seeing a lot of

0:16:44.760 --> 0:16:49.160
<v Speaker 1>expansion from lots of different companies. Um. You know, so

0:16:49.240 --> 0:16:53.360
<v Speaker 1>we're seeing Chinese battery manufacturers leaving China for the first

0:16:53.360 --> 0:16:57.320
<v Speaker 1>time building plants here in Europe. We have the South

0:16:57.400 --> 0:17:01.160
<v Speaker 1>Korean companies who have been active in the US for

0:17:01.200 --> 0:17:04.320
<v Speaker 1>a while building plants in Europe now have been for

0:17:04.359 --> 0:17:06.920
<v Speaker 1>the last couple of years, so we're asking that expansion.

0:17:06.960 --> 0:17:11.240
<v Speaker 1>There's also a huge number of companies within China who

0:17:11.320 --> 0:17:14.720
<v Speaker 1>are would be considered kind of tier two manufacturers, and

0:17:14.760 --> 0:17:19.200
<v Speaker 1>they've managed to really blossom thanks to the EV subsidies.

0:17:19.200 --> 0:17:22.159
<v Speaker 1>In China. That being said, subsidies have been stepped down

0:17:22.200 --> 0:17:26.760
<v Speaker 1>in um. They were meant to end in but they're

0:17:26.800 --> 0:17:30.240
<v Speaker 1>being slightly delayed, I believe now. And what that means

0:17:30.280 --> 0:17:32.240
<v Speaker 1>though in general, as those subsidies are step down, we

0:17:32.280 --> 0:17:34.520
<v Speaker 1>expect there will be consolidation because suddenly a lot of

0:17:34.520 --> 0:17:36.880
<v Speaker 1>those companies in China won't be able to support themselves.

0:17:36.880 --> 0:17:39.919
<v Speaker 1>But that will be the Tier two manufacturers rather than

0:17:39.960 --> 0:17:43.800
<v Speaker 1>the big players like c at l um Fact. Pharisis

0:17:43.840 --> 0:17:45.920
<v Speaker 1>is another one who's building a plant in Europe and

0:17:46.040 --> 0:17:50.840
<v Speaker 1>has contracts with Diamler et cetera. So in preparing for

0:17:50.880 --> 0:17:53.280
<v Speaker 1>today's podcast, we had a lot of material to pull from.

0:17:53.560 --> 0:17:57.640
<v Speaker 1>We've got some models, we've got some research notes. What's

0:17:57.680 --> 0:18:01.320
<v Speaker 1>the name of the model? Will you tell everybody? So

0:18:01.400 --> 0:18:05.800
<v Speaker 1>we recently updates that bottom up cost model. And I

0:18:05.840 --> 0:18:07.840
<v Speaker 1>was sitting there trying to think of what's a nice

0:18:08.000 --> 0:18:11.080
<v Speaker 1>acronym to to use for that, and I was thinking, Okay,

0:18:11.080 --> 0:18:14.680
<v Speaker 1>it's battery manufacturing, and it came to me like that,

0:18:14.840 --> 0:18:19.119
<v Speaker 1>the Batman model lightning lightning. So any b NF users

0:18:19.160 --> 0:18:20.960
<v Speaker 1>out there listening, if you want to find the model

0:18:21.000 --> 0:18:23.359
<v Speaker 1>on BNF dot com, you just search it Batman model,

0:18:23.400 --> 0:18:29.399
<v Speaker 1>which you'll get that man right there you go, James,

0:18:29.440 --> 0:18:32.119
<v Speaker 1>thank you so much for joining us today, Mark Dana,

0:18:32.200 --> 0:18:36.639
<v Speaker 1>thanks for having me. Bloomberg an E app is a

0:18:36.680 --> 0:18:39.520
<v Speaker 1>service provided by Bloomberg Finance LP and its affiliates. This

0:18:39.560 --> 0:18:42.120
<v Speaker 1>recording does not constitute, nor it should it be construed,

0:18:42.160 --> 0:18:45.920
<v Speaker 1>as investment advice, investment recommendations, or a recommendation as to

0:18:46.160 --> 0:18:48.680
<v Speaker 1>an investment or other strategy. Bloomberg an E should not

0:18:48.760 --> 0:18:51.480
<v Speaker 1>be considered as information sufficient upon which to base an

0:18:51.480 --> 0:18:54.959
<v Speaker 1>investment decision. Neither Bloomberg Finance LP nor any of its

0:18:55.000 --> 0:18:58.440
<v Speaker 1>affiliates makes any representation or warranty as to the accuracy

0:18:58.560 --> 0:19:01.240
<v Speaker 1>or completeness of the information contained in this recording, and

0:19:01.320 --> 0:19:04.000
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0:19:04.000 --> 0:19:13.080
<v Speaker 1>discribed h