16 November 2012
The battery market for hybrid and electric vehicles is expected to grow significantly by 2025 - But Europe could be lagging behind its competitors because battery manufacturers are going through overcapacity, bankruptcies and consolidation, reports the “E-drive batteries 2025” study by AT Kearney.
The market for battery cells for hybrid and electric vehicles will rise by 2025 at minimum $100 billion. About 60 percent will be plug-in hybrid vehicles, and 40 percent all-electric vehicles. In the long term, there is no doubt that battery market for hybrid and electric vehicles will be enormous. However, according to the latest AT Kearney study “e-drive Batteries 2025”, it will be difficult. “By 2025, we expect in Europe alone, a market potential of over $20 billion (€15.7 billion) for hybrid and electric vehicle batteries," said Dr. Götz Klink, head of the automotive practice at AT Kearney. "But only those who survive the next five years, can benefit from it - and that is difficult for many companies”.
Battery prices will be the main driver of the change
Today batteries for electric vehicles still cost about $600/kWh (€470/kWh), which represent a huge part of the cost of a full electric vehicle. But that will change. "We expect that by 2025 the battery costs will fall by more than half to about $290/kWh (€230/kWh)" says Stephan Krubasik, Principal at AT Kearney and author of the study. This is achieved through both new technologies such as high-voltage cathodes, silicon anodes and improved electrolytes, and the fact that packaging costs and cell production can benefit from economies of scale.
Overcapacity will lead to consolidation
But before battery manufacturers can benefit from the growing markets, there is a rocky road ahead. Currently worldwide production relies on more than 30 cell manufacturers production capacity. Demand is taking off but only slowly. "By 2015, we expect a worldwide installed capacity of about 50 GWh. Of these, only 50 to 60 percent will be taken up by demand - substantial overcapacity is immitent, "said Krubasik.
Cell manufacturers are confronted with an enormous pricing pressure from automakers. "The market is a real price war. Prices that are being negotiated today can only reach the profitability by the manufacturer in three to five years" said Krubasik. Through high investment, low margins and overcapacity, the young industry is consolidating rapidly.
Only large, wealthy and global corporations will be able to survive in the medium term. "We expect that out of 30 battery cell manufacturers currently existing today, only about 10 will survive by 2025", said Krubasik. "The first bankruptcies can already be observed in the recent past."
Europe could lag behind
After the solar industry, Europe could fall behind in another growing sector of the battery industry, as only a handful of European companies are part of the 30 existing cell manufacturers worldwide today. Asian competitors are more aggressive in building their own capacities in Europe in order to have local production plants. "Asian cell manufacturers have realised the potential and are becoming active in Europe - this can get very tight for the local players," said Klink.
For battery materials, Europe’s position is a bit better, thanks to European and especially German chemical companies, which are well-positioned to compete in the long term. "Batteries will be a key component of the future automotive industry. From the attractive market prospects will benefit only the companies that "adapt strategically to the impending upheaval in the industry, said Klink.
