Commercial Vehicles 17th January 2020

On and Off-Highway Vehicles Driving Strong Growth in Lithium-Ion Battery Market

Maya Xiao
Maya Xiao
Senior Analyst - China

Maya has an interdisciplinary technical background in vehicle electrification, system automation and robotics. Based in China, she is the lead analyst for Interact Analysis’ Li-ion battery and forklift research, also covering markets for industrial and collaborative robots.

A version of this article was originally published in Japanese by Yoshiko Iwahashi-san of Global Information, Inc. (GII) – an information service provider based in Kawasaki City near Tokyo, Japan.

GII functions as the Japanese distributor for Interact Analysis’ reports, and the article was published to promote a November 2019 seminar in Tokyo which presented Interact Analysis’ research into the topics of Off-highway Vehicles Electrification Trend, Hybrid and Electric Trucks and Lithium-ion Battery – Automotive and Industrial Applications.

Electrification of Commercial and Off-Highway Vehicles

When talking about vehicle electrification, mainstream news outlets tend to focus on consumer-led trends. Trends their audiences can relate to, like electric cars or passenger vehicles. Yet the electrification of off-highway vehicles is growing quickly too, driven by a combination of factors like stricter emission regulations, lower battery prices, and the benefits of lower total cost of ownership (TCO) for many specific applications. Interact Analysis has produced reports looking at these areas in more detail, providing answers to questions around the types of vehicles being electrified – and the applications making use of these changes – and looking at a more granular level into the technologies behind this growth.

Lithium-ion batteries

Looking back at the lithium-ion battery (LiB) market, the year-on-year growth rate of annual production capacity in terms of energy consumption reached its first peak in 2015. This was mainly due to the increase in production capacity of factories in the Asia Pacific region (APAC). Since 2018, battery manufacturing capacity has been growing faster in other areas. Europe, the Middle East and Africa (EMEA) are growing at a particularly high rate, with an annual production capacity of 118.7 GWh in 2023 and an annual compound growth rate (CAGR) of 56% from 2014 to 2023. On the other hand, China and the Americas are forecast to be 24.7% and 21.9%, respectively. As global LiB capacity continues to grow, China’s capacity will continue to increase, but the overall global share of APAC, including China, is expected to decrease from 85.5% in 2018 to 76.7% by 2023.The overall global share of APAC and EMEA countries is expected to decrease in years to come.

Electric Bus trends

The electric bus market has a significant impact on battery demand. It is dominated by battery-powered electric buses, but regular hybrids and fuel cell electric buses are expected to grow at a high rate in terms of annual vehicle deliveries. More than 90,000 battery-powered electric buses were delivered in 2017, which is about 20% of the total bus market.

In China, government subsidies have increased the electrification of city buses and are planned to extend to intercity buses as technology allows. Meanwhile, demand for electric buses in Africa and South America is also expected to increase rapidly.

The average battery size (kWh / vehicle) of an electric bus varies from region to region. In 2013, the Americas region exceeded 450 kWh / unit, and both APAC and EMEA exceeded approximately 175 kWh / unit. Interact Analysis predicts that in the Americas region, it will decrease to 450 kWh / vehicle in 2023, while it will start to increase in Europe.

Light trucks leading the way

Electric trucks, unlike electric buses, are an area in which electrification has not progressed because of the emphasis on cost. LiB is not suitable for long-distance heavy trucks due to range limitations. So, the market is restricted to light trucks and, looking at annual deliveries of battery-powered electric trucks by application, light trucks are expected to continue to dominate through to 2025.

China has the largest annual sales volume by region. However, projections by 2023 show that the EMEA region, rather than China, will show the most significant growth. Interact Analysis believes that China’s current subsidy system does not promote truck electrification. The company’s research shows that, if China were to change its subsidy scheme to include truck electrification, the Chinese market would grow much faster than currently expected.

LiB demand for off-highway vehicles will also increase

The off-highway market, which includes excavators, loaders, bulldozers, aerial platforms (AWPs), forklifts, off-highway trucks, and underground load-haul-dumps (LHDs), saw more than 2.8 million units shipped worldwide in 2018. Of these, more than 1.08 million vehicles, or 38.9% of the total, were fully electrified. Interact Analysis predicts that in 2028, 2.3 million battery-powered electric off-highway vehicles will be sold with a 55% electrification penetration rate.

Some specific off-highway equipment sectors, such as forklifts and AWPs, have a very high penetration rate. This is due to the large number of indoor operations, or operations in cities near residential areas. In these areas, the requirements of zero emissions / noise / zero odour and the purpose of creating a healthy environment for workers are driving electrification. An additional reason is that indoor environments facilitate easy battery charging. It is the extremely high penetration rate of some niche sectors of off-highway vehicles that is driving the overall seemingly high penetration rate of 38.9% of the total market.

Forklifts and AWP's possess the highest penetration rate in the off-highway vehicle market.

For specialized underground equipment such as LHDs, requirements for improved working environments are driving electrification. The electrification of lightweight equipment is progressing extremely rapidly. On the other hand, for some large vehicles, diesel engines will still be required for the foreseeable future, but a hybrid of electrified mechanical attachments is expected to be seen in the 6 to 10-year timeline. This will enable the miniaturization of diesel engines on such vehicles.

The adoption rate of LiB by type of already electrified off-highway vehicles is high for forklifts, excavators, and scissor lifts. At present, electrification of off-highway vehicles lags behind other vehicles. However, in view of stricter emission regulations, rapid growth is expected. Electrification will require a redesign of many machines, and the market landscape will be restructured. For applications that already have a large number of hydrochloric acid battery systems, such as forklifts, it is predicted that, if the price of LiB drops to a certain level, LiB will not only replace internal combustion engines but also will drive replacement of hydrochloric acid batteries.

Energy storage – an up and coming trend

In the medium term, energy storage will be a major growth source for LiBs. This will include home energy storage facilities, data centres and factory UPSs (uninterruptible power supplies), as well as storage at energy production facilities. Energy storage devices show markedly different trends across different countries and regions. The United States has the largest share of home energy storage, for example, but this is driven entirely by the private market. Meanwhile, in China, the government’s recent vigorous efforts to promote the adoption of LiB for energy storage devices will bring a new momentum to the LiB market from 2020 – as long as government promotional efforts continue similar to now.

The market for LiBs in grid energy storage is still relatively small. But many applications such as renewable energy injection and grid power supplementary services are highly promising.

Commercial and off-highway vehicles will help drive LiB growth in the short to medium term; the energy storage market has further to come but shows exciting potential

The overall outlook for LiBs is strong, and commercial and off-highway vehicles will provide a very exciting avenue for growth. Energy storage, on the other hand is a less mature market and is less promising in the short to medium term. Yet wider trends towards decarbonisation and renewable energy sources would still imply that the energy storage market has a bright future. And it seems highly likely that LiBs will play an important role here too.


To learn more about our insights into these areas, click here.

Posted in: Commercial Vehicles.