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Komatsu will quadruple the battery production capacity of its U.S. subsidiary. The increased production will be allocated not only to its current major customers in the automotive sector but also partially to mining machinery. There is a growing demand for decarbonization in mining operations driven by requests from resource majors. To prepare for the adoption of electric machinery in mines, Komatsu will strengthen its battery supply structure.
In 2023, Komatsu acquired American Battery Solutions (ABS), a battery manufacturer through its U.S. subsidiary. ABS develops and manufactures battery packs, including lithium-ion batteries, primarily supplying commercial vehicles such as trucks and buses.
Currently, ABS has a battery production capacity of 0.6 gigawatt-hours per year, but this will be increased to 2.6 gigawatt-hours over the next three years by 2026. The investment is expected to be $65 million (approximately 10 billion yen). Riding on the electric shift in vehicles, ABS has secured $500 million in orders by 2027, and enhancing production capacity is essential for fulfilling the backlog of orders.
Komatsu's acquisition of ABS aims to promote battery development for mining and construction machinery. While the introduction timeline and specifications have not been disclosed, the priority will be given to the development for mining machinery in North and South America.
Due to a reduction in subsidies, the growth of electric vehicle (EV) sales to consumers is slowing, while the electrification of mining machinery is expected to become a significant need. Resource majors are strongly committed to reducing carbon dioxide (CO2) emissions across their entire supply chain.
The International Council on Mining and Metals (ICMM), consisting of over 20 global resource companies, aims for net-zero emissions for its scope 1 (direct emissions) and scope 2 (indirect emissions related to electricity usage) greenhouse gas emissions by 2050. In large mining operations, around 100 dump trucks may be in operation, and the current diesel engines emit large amounts of CO2.
There are challenges to electrifying mining machinery. Dump trucks, which transport large quantities of minerals, require large batteries, which increase the vehicle's weight, thus potentially reducing transportation capacity compared to diesel engines due to durability issues. Charging also requires time, raising concerns about decreased operational efficiency.
To achieve both decarbonization and weight reduction, hydrogen fuel cells are an option, although the cost of transporting hydrogen can be high. There are also catenary charging systems like those used in railways, but infrastructure development remains a hurdle.
To overcome the challenges of electrification, Komatsu is not only pursuing joint battery development with ABS but also planting seeds for further collaboration. In August, it formed a strategic partnership with Swiss heavy electrical giant ABB to electrify mining machinery.
In the same month, it also began collaborating with Brazilian resource giant Vale on engine development using ethanol as fuel, advancing its decarbonization technology beyond electrification.
For Komatsu, the mining sector is positioned as a crucial market. In the fiscal year ending March 2024, sales related to mining machinery are projected to reach 1.7172 trillion yen, accounting for approximately 40% of total sales. Thanks to M&A effects, the sector has grown more than threefold over the past decade. Compared to construction machinery, which is another pillar of the business, the mining sector has higher profit margins and easier revenue generation from after-sales services.
Competitors are also focusing on the mining sector and accelerating their electrification efforts. Hitachi Construction Machinery announced in September a goal to increase sales revenue from related businesses by 40% to 600 billion yen over seven years by the fiscal year ending March 2031. It plans to launch a fully electric dump truck developed in collaboration with ABB ahead of the world, targeting the robust markets in Central and South America dominated by Komatsu and the largest U.S. company, Caterpillar.
In September, Caterpillar revealed plans for a new model of a catenary-charged vehicle. By laying charging rails alongside the roads used by dump trucks, it can flexibly adapt the design to various locations such as high-speed transport roads and curved roads.
Market research firm SDKI predicts that due to the expansion of global resource development, the market size for mining machinery will grow by about 80% from 2023 to approximately $200 billion by 2036. As the market grows, the increase in CO2 emissions is unavoidable, making the development of machines that respond to decarbonization increasingly important.
