PRTM Analysis Finds Li-ion Battery Overcapacity Estimates Largely Unfounded, with Potential Shortfalls Looming; Total Market Demand in 2020 Will Require 4x Capacity Announced To Date
|PRTM concludes that the large format Li-ion battery market could be under-supplied by nearly 10% by 2016. Click to enlarge.|
Recent market reports have predicted that the global market for large format lithium-ion batteries—such as those used in plug-in vehicle applications—will see a substantial overcapacity in the coming years, with some predicting an excess of more than 100% in 2015. (Earlier post.)
However, Oliver Hazimeh, Director and Head of Global E-Mobility Practice at global management consulting firm PRTM, asserts that the notion of overcapacity is largely unfounded, and that, in fact, significant additional capacity may be needed to support the long-term growth of the electric transportation market. PRTM’s assessment, based on what it called a thorough review of the operational market dynamics, found the following:
Under a “Most Probable” scenario, battery manufacturing capacity will hit a shortfall by 2016. Additional capacity investments beyond those recently announced by battery manufacturers will be required to avoid a Li-Ion battery shortfall of 30% by 2017.
The total Li-Ion battery market demand in 2020 will require about 200 GWh capacity, which is 4x the 50 GWh capacity that has been announced to date.
A global footprint assessment of top battery manufacturers suggests that the United States and Europe are facing a shortfall in cell manufacturing capacity—the largest value-added step in battery production and a rapidly increasing source of global competitive advantage. Approximately 70% of the value of a Li-Ion battery pack resides in the Li-Ion cells, and low labor needs make manufacturing investments strategically sound.
Asia has been the center for consumer electronics-based Li-Ion battery manufacturing to date. As many countries worldwide consider building out automotive cell manufacturing to meet rising demand in the electric transportation sector, Asia is positioned to remain a leading net exporter of automotive battery cells under their current level of investment. Under-investments in cell manufacturing in the US and Europe to date—while offshore investments continue to rise—have wide-ranging consequences in global competitiveness. These outcomes include an inability to capitalize on an automotive battery market estimated to be $60 billion in 2020. The risks also include missing high-quality job creation opportunities in this sector.
PRTM’s assessment includes the following key aspects:
All manufacturers will base future capacity investment on market demand. While battery companies are making initial investments slightly ahead of the market to optimize cost and scale, future investments will be made only when the market conditions justify such an investment.
Capacity expansions will not take place in one tranche—they will be rolled out in several phases, through 2015 and beyond. Many companies plan to build large facilities capable of supporting future volume, but initial machinery capex will remain relatively small.
Companies funded through US DOE stimulus may be incented to build ahead of the market, however stimulus-funded investment represents only 1/3rd of planned global capacity expansion—the remaining 2/3rds will remain driven purely by market demand.
Previous reports matching market growth to planned capacity were relatively bullish on capacity expansion while being bearish on market growth. Moreover, large format cells can also be used in utility applications, which are not included in most market growth forecasts. This combination almost definitely would lead to an overcapacity projection.
There are only a handful of capable and qualified suppliers of the capital equipment required for a Li-ion battery manufacturing facility. PRTM believes that lead-times are currently in the range of 18-30 months, significantly impacting the rate at which capacity can be installed.
|PRTM finds that the US and Europe have under-invested in cell manufacturing capacity, which could lead to a potential shortfall in domestic Li-Ion cell supply. Click to enlarge.|
PRTM analysis finds that EVs and plug-in hybrids (PHEVs) could account for nearly 10% of the global market by 2020, assuming significant barriers are addressed first.