Maya has an interdisciplinary technical background in vehicle electrification, system automation and robotics. She is now the lead analyst for Interact Analysis’ Li-ion battery and forklift research, also covering markets for industrial and collaborative robots.
Global trends for electrification are currently moving into overdrive, pushed by a multitude of factors, particularly environmental and energy security concerns, as well as improvements in the economic viability of the technology. Our latest research shows that, as a result of this, the lithium-ion battery market is undergoing radical change.
The new lithium-ion battery market report from Interact Analysis is the only one of its type to offer a strong level of detail on market segments other than passenger cars, such as trucks, energy storage systems and consumer electronics. The report is also unique in that it systematically reports on the battery manufacturing equipment market.
For many companies in the lithium-ion battery supply chain, one of the most interesting trends in the industry is that it is right now poised for a second round of growth in Europe. And many of the main Asian suppliers want to open factories in Europe (and the US) in order to meet growing global demand.
The supply side – radical growth in Europe predicted
On the supply side, global lithium-ion battery production capacity reached 327.5 GWh in 2018, showing a year-on-year increase of 35%. And production is predicted to show a CAGR of 22.7% between 2018 and 2023.
From the perspective of battery manufacturing equipment vendors, because the technical route of the battery is relatively fixed, the capacity proportion of different cathodes and package types only changes slowly. The result of this is that there is less demand for upgrades or additions to battery manufacturing equipment.
Production capacity for lithium-ion batteries in electric passenger cars in 2023 will be more than three times that of 2018, and Interact Analysis predicts there is a strong possibility of unutilized capacity in the market.
It is at the regional EMEA level where the supply-side changes are most notable. If all currently publicized expansion and production plans are adhered to, then EMEA will show a radical production capacity CAGR of 56% to reach 118.7 GWh in 2023 (See Figure 1). This affects more than just cell production lines: it also implies growth for ancillary equipment, facilities and raw materials. Meanwhile, localized procurement will bring huge opportunities to the local industry chain.
In APAC, general regional decline will be partially offset by China which will have increased its total share of global production capacity from 55.4% to 60.0% between 2018 and 2023: the battle for capacity expansion will be fought between China, The Americas and EMEA.
The demand side – saturation in the consumer market; strong growth in transport
In 2018, global lithium-ion battery sales reported year-on-year growth of 23.1% – to 174.5 GWh (See figure 2). And, as key technological challenges are cracked, the (currently relatively small) energy storage market is predicted to show phenomenal growth with a CAGR of 40.4% over the next five years – driven by growth in renewable energy. Back in 2017, the consumer market’s share of lithium-ion batteries was surpassed by the transportation market’s share for the first time. Transport is expected to account for 68.4% of battery sales in 2023, becoming the main demand-side driver of the market.
Saturation of demand for lithium-ion batteries in consumer electronics applications, and a failure to establish an advantage in the transport market, accounts for a predicted fall in the battery sales market share of Japan and South Korea. In spite of this, however, the lithium-ion battery market remains concentrated in Asia for the short term – with the region accounting for 72.6% in 2018, of which China contributed nearly half. Over the next five years China will show steady growth, but it is the EMEA market that may attract most interest. EMEA is predicted to become the second-fastest growing market, just behind China, over the next five years, largely due to rapid growth in the electric truck and energy storage system markets.
Political sentiment is a key driver in the lithium-ion battery market in China and Europe. In both regions, the battery market reflects government energy strategy. China has few indigenous oil deposits, and so must import large quantities. Therefore, a desire for energy security explains much of the motivation to develop battery technology. In the case of Europe, the EU has put legislation in place that binds the organization into ambitious emissions reductions. Again, this is a strong driver for battery investment. For the US, with strong domestic oil and gas reserves, and a political leader who is less concerned about climate change, energy policy is more market driven. Other strong drivers globally are the ever-improving economic viability of both lithium-ion battery and renewable energy technology, as well as the rise of autonomous, connected cars which tend to be based on pure electric car designs.
Declining lithium-ion battery costs are a particularly important factor because the average battery price is predicted to drop by 30% by 2023, leading to a soaring penetration rate into price sensitive applications. Price drops will happen because raw material cost will decline, and because the long-term reduction of battery cost will be ensured by improvement of battery energy density and production efficiencies. If the average price of a battery drops by $100/ kWh, the penetration rate of electrification will increase particularly rapidly, especially in price-sensitive markets such as off-highway vehicles.
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