Source: consultancy.eu
Date: May 16, 2024
The lithium-ion (li-Ion) battery supply chain is projected to grow to over $400 billion by 2030, as more giga factories emerge all over the world. But there will be a number of notable challenges along the way, according to ALEXEC Consulting.
With the electrical vehicle (EV) industry set to continue to grow and compete more and more with the combustion engine industry, EV batteries – and the resources needed to manufacture them – are gaining an almost extreme strategic importance for original equipment manufacturers (OEMs).
Yearly global gigafactory capacity is projected to reach roughly 6,000-7,000 Giga-Watthours (6-7 Terra-Watthours), of which the major portion will be utilized within the mobility sector.
This growth translates to a market value of between $400 and $450 billion by 2030, with the exact number depending on further reductions in cell sales price as well as actual giga factory realization, which will largely depend on market demand in the upcoming years.
Current projections estimate the demand for li-Ion batteries to quadruple by 2030, and China’s EV-market is expected to grow to a share of 40% or even higher by 2030. Nevertheless, slowing government subsidies and high EV consumer prices combined with a high inflation have slowed down demand in US and Europe.
Jan Wasserbaech, partner at ALEXEC Consulting, confirms that demand for electric vehicles currently shows a slowdown. “We currently see over capacities and slower EV demand in Europe and North America and project this to last for at least another 2-3 years. This could be even further prolonged, for instance by the political setup after elections in the US.”
Beyond the EV drive
The huge boom in demand for batteries does not just stem from the EV industry, it also comes from the rest of the wide array of use cases for batteries, including applications in the energy transition related to storing green energy. Stationary battery energy storage systems (BESS) increase the effectiveness of green energy sources, for example by storing energy coming from wind turbines or solar fields.
“In contrast to the years of 2020 to 2022, where the focus was very much on the successful ramp up of production capacities and fulfilling the customer demands – often at any cost – the market today is driven by increasing cost pressure along the entire value chain,” according to Wasserbaech.
“We will see further significant cell price reductions, with China leading the way, which will put massive pressure on cell manufacturers that are newly entering the market. Amid this severe price competition, we expect to see a certain consolidation in the European and US battery market.”
The manufacturing side of the industry will need to continue working hard on finding solutions to the various cost-drivers occurring during industrialization and supply-chain set-up for giga factories.
“For the battery players it is crucial to increase cost competitiveness, assure resilient supply chains and increase flexibility to react on market trends, for example in their factory design or cell chemistry strategy,” stated Wasserbaech.
“To stay competitive after 2030, a focus on new technology trends is important – some key-words here are Sodium-Ion or Solid-State batteries – especially for European and US players, as catching up with the current dominance of Asian players in conventional lithium-ion technology will be challenging,” he continued.
Although the industry will have to do continuous adapting along the way, the future of electric mobility and the continued need for batteries is a certainty. Many developed countries continue to drive moves to phase out combustion engines in private and public transportation.
“Regarding the general long-term trend towards electrification, nothing has changed from our perspective. Energy efficiency and the technology of electric power-trains, including the battery, are superior by all measures and will sooner or later help EVs to surpass the market share of conventional combustion engines, as it is already happening in China in the next years,” noted Wasserbaech.
ALEXEC Consulting is a management consultancy highly specialized on the EV and EV battery industry. The firm operates with local teams in Europe, North America, Asia, and the Middle East.
