London, UK: May 10th 2019, May 10, 2019 (GLOBE NEWSWIRE) -- After the Chinese auto industry decidedly stepped-up their EV production plans in late 2016, western automakers announced in 2018 several new EV models coming to the market in 2020/2021. Though the global auto industry seems to be geared towards electrification, most of the battery supply chain remain focused in Asia. Battery raw materials flow mostly into China for chemical processing to later be assembled into cells and packs in China, Korea and Japan.
In 2018, 75% of the world´s Li-ion production was based in China, while the USA had 9.5%, Japan 8.4% and Korea 4.5%. However, most of USA´s production capacity belonged to Asian battery makers in 2018, with Tesla´s Gigafactory the most notorious shared operation with Japan´s Panasonic. In this sense, western automakers remain highly dependent on Asian Li-ion batteries. From a technological and supply chain standpoint this poses an imminent risk for the long-term competitiveness of the European and North American auto industry.
To balance this unequal battery output, the USA and Europe are expected to invest by 2028 an estimated US$21.6Bn in the construction of new battery production facilities, although some of them will be installed and owned by Asian companies. Nevertheless, China alone is expected to invest a further US$51Bn in new battery production plants but this time not to satisfy its internal EV market. Instead, China is expected to raise its installed capacity to 870GWh becoming the world leading exporter of automotive. This will be the result of a stimulus policy shifting from consumer side to the supply side of EV battery production.
Competition will remain fierce with margins increasingly compressed, and weaker companies either being acquired or going out of business. Korean and Japanese battery makers will still hold certain competitive advantages as overseas production will be operational, and long-term battery supply deals will be already closed with western automakers. Though the largest battery company in 2018 had around 12% global market share, during the next decade Roskill expects leading companies to recapture the >30% market share experienced by companies like Panasonic in 2010.
EV sales will remain challenging until 2021 with subsidies being phased out not only in China but in other major western markets. However, by 2021 cell cost per kWh is expected to slip under US$100 for some companies. This will allow the total cost of ownership (TCO) of an EV to be consistently cheaper than an ICE car in some countries. EU regulations on transport emissions pushing for fleet averages under 61g/km CO2 will reinforce automakers EV plans as these limits have been historically mirrored by countries like China and Korea. As a result, 68% of new vehicle sales will have some sort of electrification by the end of the next decade, with plug-in cars accounting for more than 22M sales annually.
In this process, the whole battery supply chain will need to speed up expansions, though appetite for new production maybe weak in the short term and margins are likely to be reduced. This limitation for companies like cathode producers will sometimes be compensated with off-take agreements being closed between the end-users of the cathode materials (e.g. auto or battery makers) and the mining companies. Overall, companies operating in the active battery materials sector will be very exposed to price fluctuations of battery raw materials as already observed in 2019.
While solid-state electrolyte batteries are expected to become the enabler behind the use of higher energy density materials like lithium metal, several global battery makers consider them a “commercial fantasy” in 2018. The limited ionic conductivity of the solid electrolyte today makes this type of battery unsuitable when installed in power-demanding applications like EVs. Nevertheless, corporate venture capital investment in solid-state has been constant since 2010s, numerous patents are being filled annually, and most academics agree that these batteries may become commercial for the automotive industry at the end of the next decade.
Recycling of Li-ion batteries has become of paramount interest as of 2018. Sustainability of the EV battery supply chain is a concern for most automakers. However, the recycling of Li-ion batteries is a complex and integrated industry in which cobalt recovery was the main economic driver in 2018. Sorting, refurbishing of second life of batteries, recycling of the materials, and their chemical re-processing are natural steps to make the recycling industry profitable and sustainable over time.
Overall, the Li-ion battery industry will continue to grow at exponential rates, around 28%py, as the supply chain is geared towards this technology, and most stakeholders, from regulators to automakers, are committed to electrify their vehicles as a method to reduce emissions while maintaining their industrial hegemony.
Roskill’s Lithium-ion Batteries: Outlook to 2028 report was published in April 2019. Click here to download the brochure or sample pages or access further information.