The global electric battery market has expanded dramatically over the last year, as the push to shift from traditionally fuelled cars to electric alternatives has never been stronger. So, how will emerging battery markets overcome supply chain challenges to ensure that the future of electric battery development is secure? The global supply chain is still being hit hard by ongoing pandemic restrictions, the Covid spill-over effect, and, most recently, the Russian invasion of Ukraine. This means that renewable energy projects are seeing lengthy delays and the production of core components is being outweighed by the growing demand. But energy and manufacturing firms around the world are optimistic about raising battery production to meet consumer needs as demand increases over the next decade.
McKinsey estimates that the global battery market will grow by over 20 percent per year until 2030 to reach at least $360 billion, with upper-end estimates increasing to $410 billion. In addition, the development of one 30 to 40 GWh factory per year would create around 3,200 direct jobs.
Europe and North America are likely to see the biggest opportunities, with the potential for substantial growth in their largely underdeveloped battery markets over the next decade. However, China and South Korea already have well-established battery markets, which will continue to expand, presenting the main competition. Based on similar industries, McKinsey predicts that the global market will consolidate around ten to 15 battery cell manufacturing players, meaning that the time to develop competitive projects is quickly running out. Battery performance, the scale of production, and the competitiveness of costs will likely be the driving factors for competing companies.
With the ongoing Russia-Ukraine conflict, it has become evident that Europe and North America must decrease their reliance on authoritarian powers to ensure the future stability of their major industries and energy supply. In addition, pandemic-related supply chain disruptions have already demonstrated European and U.S. dependence on China’s manufactured goods for many industrial sectors. As the U.S. and Europe develop their battery manufacturing industries, this could be the chance for the two regions to overcome supply chain challenges and establish stronger energy security for the next decade.
However, emerging markets are already stumbling at the first hurdle. According to recent reports, the U.K. may fail to establish a strong electric car industry by the end of the decade – in line with its ban on the sale of petrol and diesel vehicles by 2030 – if it cannot develop its battery manufacturing industry more rapidly. Automakers are ambitious in their rollout of several electric vehicle models over the coming years, expecting consumer demand to grow significantly as they switch away from traditionally fuelled cars.
However, the limit on the import of low-cost Asian batteries means that the U.K. will have to develop its battery manufacturing industry to meet demand. The main obstacle is the lack of suitable sites for the development of ‘gigafactories’, as well as the tendency to import batteries from other European countries.
The U.K. government has pledged $1.2 billion in support of the country’s EV battery supply chain but is doing little to encourage greater battery plant development. At present, researchers Benchmark Mineral Intelligence estimate that the U.K. will require around 175 GWh of battery capacity by 2035 to supply around 3 million EVs. It is expected to achieve 56.9 GWh by 2030, based on current developments. Meanwhile, the rest of Europe is expected to reach an output of 821.3 GWh, with Germany leading the market.
And some say that others simply cannot replicate the success of China when it comes to lithium batteries, as it continues to dominate the global market. One reason is the significant head start that China has had over its competitors, many of which are currently searching for suitable locations for huge battery factories before they can even consider building them.
Despite its lack of lithium reserves, China has established itself as the world’s biggest lithium battery manufacturer, with around 72 percent of the battery market share in 2020, compared to 60 percent in 2018. Some estimates are even higher. Comparatively, the U.S. holds around 8.5 percent of the market share.
China has achieved its battery dominance by investing huge amounts of money in its EV market. The Chinese government has invested anywhere between $60 billion and $100 billion in subsiding the production of EVs to rapidly expand the market and create greater demand for lithium batteries. It has also been subsiding battery production costs to boost output. But the rest of the world simply cannot offer this type of financing, particularly at a time when countries are racing to secure their energy security in the face of major oil and gas shortages.
Another major obstacle for emerging battery manufacturers is the inevitable increase in raw material prices over the coming years. EV battery prices have been decreasing in recent years as the production scale has risen. Battery cells cost around $128 per kilowatt-hour at present. But prices could increase by 22 percent between 2023 and 2026 due to an increase in raw material costs, to reach $138 per kilowatt-hour.
Sam Jaffe, Vice President of battery solutions at E Source, stated “The tsunami of demand is coming” but “I don’t think the battery industry is ready for it.” The global shortage of raw materials, such as lithium, has exposed the battery manufacturing industry’s weakness and the need for much greater levels of mining to meet the growing global demand. This is just one more challenge that emerging manufacturing countries must face as they try to develop their battery manufacturing industries to compete with that of China.
As global demand for batteries increases, in line with growing EV demand, several countries around the world hold the potential to establish their battery manufacturing industries to compete with the dominant Chinese market. However, companies across Europe and North America must overcome significant challenges if they want to solidify their reputations as major global players in the battery market.
Extracted in full from: Can Anyone Compete With China’s Battery Dominance – OilPrice.com – Business Mayor