Quality Over Quantity: The Complex Case Behind Present and Future Li-Ion Battery Manufacturing

Driven by global EV adoption, Li-ion battery manufacturing is expected to expand significantly in the next three years. A Lux analysis of the larger Li-ion battery manufacturers’ capacity and expansion plans found that current Li-ion manufacturing capacity may triple by 2020, from 73 GWh to 238 GWh globally. Major growth is planned in China by BYD and notably CATL; however, it’s worth taking these projections with more than a grain of salt, as the markets of Li-ion batteries are changing significantly.

What complicates the Li-ion battery manufacturing analysis is that these firms manufacture different Li-ion chemistries for different markets and applications. The current regulatory environment in China heavily favors lithium iron phosphate (LFP) chemistry, citing both safety concerns and protecting domestic manufacturing. The larger global automotive industry, however, has swung heavily behind the more energy-dense nickel manganese cobalt (NMC) chemistry employed in the Chevrolet Bolt and BMW i3, or nickel cobalt aluminum (NCA) chemistry used extensively by Tesla supplied by Panasonic ([see the updated Automotive Battery Tracker] client registration required). Because of this market fragmentation, it’s unlikely that the expansion in manufacturing capacity will dramatically affect Li-ion battery prices any more than Lux has already predicted, with conventional cell prices bottoming out to $100/kWh by 2026. So while the earlier expansion of Li-ion battery manufacturing was heavily focused on reducing prices from $1,000/kWh to around $250/kWh, this next expansion is set to be more about meeting market demand than further reducing prices.

What will be necessary to further expand EV adoption isn’t driving down costs through manufacturing, which several papers suggest will only marginally impact price even without market fragmentation impacting the effect of manufacturing scale, but with new Li-ion chemistries that increase specific energy and reduce the amount of expensive active material. Alternatively, business models that open up new revenue opportunities for electric vehicles can swing the economic favorability toward EVs. Readers should view these manufacturing expansions as a “business as usual” case, but watch for changes in government policy or business strategy. China loosening LFP protectionism or BYD adopting NMC for passenger cars can have an outsized effect on the Li-ion battery landscape very quickly.

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