Automotive battery manufacturers are threatened by overcapacity
The share of electrified powertrains will increase significantly in all major automotive markets, a development driven by dramatic battery cost decreases over the next 10 years. According to Roland Berger experts, planned investments will result in significant overcapacity between 2014 and 2017, especially in the US and in Japan. As a consequence, only six to eight global battery manufacturers will survive the next five to seven years. These are the findings of a new market survey conducted by Roland Berger Strategy Consultants titled "Powertrain 2020 – Li-ion batteries – The next bubble ahead?"
"Manufacturers of lithium-ion (Li-ion) batteries currently enjoy a great amount of hype, but massive consolidation is expected to come in the next 5 to 7 years," says Wolfgang Bernhart, Partner with Roland Berger Strategy Consultants and expert in alternative powertrain technologies. Most experts agree: the share of electrified powertrains will increase in all major automotive markets, driven by significant battery cost reductions over the next 10 years. In an aggressive scenario, plug-in hybrid electric vehicles (PHEV) and electric vehicles (EV) in the key regions will account for no more than 1.2 million vehicles by 2015. Li-ion battery demand for HEV/PHEV and EV accounts for 0.82 million "EV equivalents", whereas installed capacities in 2015 will be over 2.6 million EV equivalents. The demand for Li-ion batteries will continue to rise until 2020, but 3 million EV equivalents won't be reached until 2018 at the earliest.
Overcapacity between 2014 and 2017
As a result of this development, planned investments will result in significant overcapacity between 2014 and 2017, especially in the US and in Japan. Given the announced investments, capacity in 2015 will already reach 200% of the demand projected for 2016. In addition, not all investments have been announced; as-yet unknown investments by key players will lead to further overcapacity, and national subsidies will stimulate even more investments.
Only a few manufacturers will survive
In addition, high levels of R&D and CAPEX will be required to drive down costs fast: EUR 50-100 million for new cell chemistry, EUR 350 million for a 100,000 unit plant. "Therefore, only six to eight global battery manufacturers will survive in the next five to seven years," states Bernhart. "The critical size will be approximately EUR 600 million in revenues in 2015." Western governments therefore need to act now in order to avoid losing future technologies to Asia. At the same time, battery suppliers need a well-defined strategy to gain market share fast in order to survive. And last but not least, investors should be aware of massive investment risks. As Bernhart puts it: "Unfavorable factors are piling up. But managed correctly, electrified powertrains will still be a profitable market in the future."
"Manufacturers of lithium-ion (Li-ion) batteries currently enjoy a great amount of hype, but massive consolidation is expected to come in the next 5 to 7 years," says Wolfgang Bernhart, Partner with Roland Berger Strategy Consultants and expert in alternative powertrain technologies. Most experts agree: the share of electrified powertrains will increase in all major automotive markets, driven by significant battery cost reductions over the next 10 years. In an aggressive scenario, plug-in hybrid electric vehicles (PHEV) and electric vehicles (EV) in the key regions will account for no more than 1.2 million vehicles by 2015. Li-ion battery demand for HEV/PHEV and EV accounts for 0.82 million "EV equivalents", whereas installed capacities in 2015 will be over 2.6 million EV equivalents. The demand for Li-ion batteries will continue to rise until 2020, but 3 million EV equivalents won't be reached until 2018 at the earliest.
Overcapacity between 2014 and 2017
As a result of this development, planned investments will result in significant overcapacity between 2014 and 2017, especially in the US and in Japan. Given the announced investments, capacity in 2015 will already reach 200% of the demand projected for 2016. In addition, not all investments have been announced; as-yet unknown investments by key players will lead to further overcapacity, and national subsidies will stimulate even more investments.
Only a few manufacturers will survive
In addition, high levels of R&D and CAPEX will be required to drive down costs fast: EUR 50-100 million for new cell chemistry, EUR 350 million for a 100,000 unit plant. "Therefore, only six to eight global battery manufacturers will survive in the next five to seven years," states Bernhart. "The critical size will be approximately EUR 600 million in revenues in 2015." Western governments therefore need to act now in order to avoid losing future technologies to Asia. At the same time, battery suppliers need a well-defined strategy to gain market share fast in order to survive. And last but not least, investors should be aware of massive investment risks. As Bernhart puts it: "Unfavorable factors are piling up. But managed correctly, electrified powertrains will still be a profitable market in the future."
