Anderman: Li-ion capacity far outstripping demand as automakers focus more on hybrids, less on full EVs
Global automotive Li-Ion battery production capacity is outstripping demand five-to-one as automakers refocus on hybrids and away from full electric vehicles, according to Dr. Menahem Anderman’s recently released xEV Industry Insider Report. Anderman is founder and chairman of the Advanced Automotive Battery Conference (AABC); the 13th annual conference is scheduled for February 2013 in Pasadena, California.
The report notes that despite heavy subsidies by governments and automakers, 2012 EV sales are coming short of meeting many automakers’ sales and production plans. Conversely, those of HEVs are in line with plans. As a result, production plans for EVs and plug-in hybrid electric vehicles (PHEVs) for the next 4-5 years are being slashed. Anderman projects a global EV/PHEV 2016 market at around 0.6% of anticipated 2016 new vehicle sales, leaving the over-invested battery industry in a trying environment.
On the positive side, opportunities will emerge for HEV batteries, with battery design, size, and dollar value per vehicle varying considerably. Anderman says that multiple configurations of HEVs with various functionalities, voltages, power levels and energy-storage requirements are under development with potential for large vehicle sales volume later in the decade.
The xEV Insider Industry Report notes that the higher the level of electrification, the more problematic the cost/performance ratio of the vehicles—which explains the weak customer demand. Consequently, Anderman sugests, government policies including the California Zero Emission Vehicle regulation; the European tailpipe CO2 regulations; and the Chinese ‘new energy vehicles’ rules will continue to have an overriding impact on the development of the xEV industry.
According to the report’s baseline estimate:
The global EV market will grow from 65,000 units in 2012 to 450,000 in 2020;
The PHEV market will grow from 57,000 units in 2012 to 750,000 units in 2020;
The HEV market will grow from 1.57 million units in 2012 to about 4.1 million in 2020; and
The associated Li-Ion automotive battery business will expand from $1.4 billion in 2012 to $8.5 billion in 2020.
The report is based on Anderman’s on-site interviews with senior battery technologists and business development executives at 15 global automakers and 25 of their current and prospective battery suppliers. It includes an assessment of the current status of Li-Ion battery technology, including design, performance, durability, safety, and cost, and prospects for improvement. The Report also explores the manufacturing status of battery producers and which ones are best positioned to succeed in the world market, with individual forecasts for each battery supplier.
|Roland Berger’s projections of xEV sales through 2015. Source: Roland Berger. Click to enlarge.|
Roland Berger: the Li-ion bubble bursts. In October, strategy consultancy Roland Berger updated its 2010 report on the Li-ion battery business in which it warned that only six to eight global players in rechargeable battery business would survive through to 2017. In the 2012 update, the consultancy reported that the process of consolidation across the Li-Ion battery market is progressing even faster than expected.
The tremendous hype around Li-Ion batteries has left us with a bubble. Government support and far too optimistic growth assumptions about electro mobility have led to major overcapacities. What is more, the ambitious drive to achieve economies of scale as fast as possible has triggered a fierce price war between the established market players in Asia and new players in the US.—Thomas F. Wendt, Partner at Roland Berger Strategy Consultants’ Chicago office
The Roland Berger study starts with a bottom-up calculation of cell and material costs right along the value chain. It shows that, in many cases, producers of large-formal Li-Ion batteries will not be able to generate sufficient earnings to cover their costs of capital as the automotive OEMs have been able to force significantly lower prices on their battery suppliers. OEMs will be paying between €180–200 per kWh for large-format battery cells until 2014/2015.
In this environment, battery producers can’t generate sufficient cashflow to make vital investments in new and more efficient production systems and in the R&D needed for next-generation batteries. Yet this spending is important for driving down material costs.—Thomas Wendt
The tight margins and lack of capital for new investment will result in a major market shake-out over the next few years, Roland Berger suggests. Both the battery manufacturers and their customers, the OEMs, will be forced to rethink their strategies, according to this report. Alternative technologies, such as start-stop systems or light-hybrid engines, do not offer a promising market for battery makers. New developments in lead-acid batteries also present some big challenges for suppliers of Li-Ion batteries as they seek to remain competitive, according to the report.