The era of electric vehicles (EVs) has arrived and batteries are poised to become a leading power source for their mobility. To capture market share and economies of scale, battery cell producers are adding massive amounts of production capacity. In a recently developed market model, it has been forecasted that global capacity for battery cell production will exceed market demand by a huge percentage, and this will eventually exert tremendous pressure on cell prices. To survive in this challenging market, producers will need to slash prices to fully use their capacity; even manufacturers of battery cells with innovative features will not be exempt. To preserve their margins while cutting prices, producers will need to reduce their manufacturing costs.
Improving operational performance is the most effective way for battery producers to become cost competitive in a market burdened by overcapacity. By transitioning to the factory of the future, producers can reduce total battery cell costs per kilowatt-hour (kWh) of capacity by up to 20%. The savings result from lower capex and utility costs and higher yield rates. The production-related costs (excluding materials) can be reduced by 20% to 35% in each of the major steps of battery cell production: electrode production, cell assembly, and cell finishing. Electrode production benefits from faster drying times that increases yield rates and reduces capex for equipment. In cell assembly, data-driven automated adjustment of parameter settings increases accuracy and reduces production times. Cell finishing is enhanced by shorter times for formation and aging which significantly reduces capex requirements.
Today, a majority of companies that specialize in battery cell manufacturing equipment are in China, Japan, and South Korea. However, many Asian battery cell manufacturing suppliers are operating at more than 95 percent capacity, leaving little room to increase output, and might prioritize orders from their existing local customers over those from new European market entrants and other regions. This creates an opening for manufacturers from Europe, the United States, and other regions to join the effort to activate their battery cell manufacturing industry.
As supply chains remain in distress across the globe, automakers are spending billions to move production of battery cells to their home countries to meet what’s expected to be rapidly growing demand for electric vehicles over the next decade.
Other than Tesla, who is a leader in the EV sales market, automakers have been reluctant to invest in battery cell production until recently. Instead, they’ve relied on suppliers who are largely based in Asia to build such parts. Many, including Tesla, have or plan to partner with battery cell suppliers such as Panasonic and LG Chem to produce parts.
Based on a rolling five-year average of announced investments, companies plan to invest USD 330 billion in the next five years throughout the global EV supply chain. About a third of that is expected to be for batteries, largely in China and Europe, while the U.S. attempts to catch up.
In more recent updates, Toyota said it plans to invest about USD 3.4 billion (380 billion yen) on automotive battery development and production in the United States through 2030, including a new USD 1.3 billion battery plant. This announcement comes after Ford announced its investment of more than USD 11.4 billion in new U.S. facilities that will create nearly 11,000 jobs to produce electric vehicles and batteries, including twin lithium-ion battery plants in central Kentucky through a joint venture with SK Innovation.
Following Tesla’s lead, General Motors could be next to produce its own battery cells and packs in the U.S. Through a joint venture with LG Energy Solution, the Detroit automaker is scheduled to begin cell production at an Ohio plant next year. The plant is expected to be the first of at least four, including another announced in Tennessee, in the coming years.
Further on, iPhone maker Foxconn also unveiled its plans to produce EVs; they are looking at producing electric cars and buses for auto brands in China, North America, Europe, and other markets.
Domestically, India plans to pitch to companies such as Tesla Inc, Samsung, and LG Energy to encourage them to invest in manufacturing batteries locally, as it looks to establish a domestic supply chain for clean transport. The move is part of a broader USD 2.4 billion incentive program to boost battery manufacturing for which the government has begun inviting investment proposals from companies. Meanwhile, domestic players like Reliance Industries, the Adani Group and the Tata Group have also shown expressed their interest in the space.
US-based clean energy and mobility products start-up Power Global plans to invest around USD 25 million (around Rs 185 crore) to set up a lithium-ion battery manufacturing unit and battery swapping infrastructure in India over the next two to three years. This is in line with India’s goal of achieving clean auto technology that is central to its strategy to cut pollution in major cities and reduce oil dependence, while also meeting its emissions targets.
Electric vehicles (EVs) currently make up a fraction of total sales in India, mainly due to their high price as the batteries are imported. But growth is picking up as the government offers incentives to automakers as well as EV buyers. India intends for electric cars to make up 30% of total private car sales by 2030, and for electric motorcycles and scooters to make up 40% of total sales.
This is expected to drive demand for batteries that currently contribute about 35% to 40% of the total vehicle cost but can be lowered with local production. Under the terms of the USD 2.4 billion program, India wants to establish a total of 50 gigawatt hours (Gwh) of battery storage capacity over five years which it expects will attract direct investment of about USD 6 billion.
Battery cell producers and automakers must take actions to capture these benefits provided by the Indian Government. Producers can retrofit existing plants with digital enhancements to structures and processes and design new plants as factories of the future. For automakers that manufacture EVs in the Indian Market, it is essential to become price-competitive with combustion-powered vehicles before 2030.
Mehul Shah is the Vice President, Transport BUÂ Exide Leclanche Energy Pvt Ltd. Nexcharge