I Want to Say One Word to You: Batteries!

The Omnibus (Honore Daumier, 1864)

Electric Cars: Not So Fast

The future of personal and commercial mobility is undoubtedly electric. But thus far, sales of electric vehicles have been disappointing. A hefty price tag and lack of charging infrastructure continue to stall broad adoption, especially in regions that are afflicted by air pollution and should see high demand for EVs.

Internal combustion vehicles will continue to dominate the new vehicle market for the next five to ten years. Bloomberg New Energy Finance (BNEF) estimates that by 2030, EVs will make up 44% of all new vehicle sales in Europe, 41% in China, 34% in the US and 17% in Japan. India,  owing to a shortage of charging infrastructure and a lack of affordable EV models, will trail these regions, with only 7% of total sales.

In the next decade, active participation of consumers in reducing air pollution, proven cost advantage and growing availability of charging infrastructure will lead to increase in sales of electric vehicles. By 2040, BNEF estimates, the share of electric vehicles will grow to represent 55% of the global light-duty vehicle market.

Growth in the EV segment in China is much faster. Driven by government policy directives, subsidies, quotas and licensing privileges rather than consumer interest, EV sales in 2025 will account for almost half the global EV market. 

The Chinese government sees multiple strategic long-term gains from its aggressive EV policy: cleaner air, reduced reliance on imported oil and, perhaps most importantly, becoming a global leader in electric powertrain and battery technology.

Hop on the (Electric) Bus, Gus

Chinese bus manufacturers are leading the industry in styling, cost and quality, and are responsible for 99% of the global bus market. These manufacturers are leveraging their position to meet a rising demand—mostly in China—for electric buses. The e-buses market is expected to grow at a CAGR close to 36% during 2018 to 2023 thanks to fleets expansion and replacement of older internal combustion buses.

90% of the 97,000 urban buses sold in China in 2018 utilize electric powertrains. Shenzhen, a city with a population of 13 million, purchased more than 16,000 e-buses over the past five years. In contrast, the entire European municipal bus market, both EV and IC, totaled only some 13,000 units.

I Want to Say One Word to You: Batteries!

By BNEF’s calculation, the transition to battery powered EVs and e-buses will result in power capacity of 2000 TWh, adding 6% to global electricity demand in 2040. However, the transition from internal combustion engines to electric vehicles is expected to displace 7.3 million of fuel barrels a day.

By 2030, 84% of global municipal bus sales are expected to be electric, creating a surge in demand for batteries. By some estimates all battery types including Lithium-ion , Lead Acid and Nickel Metal Hydride will see sales grow by 19% year over year in the next five years.

Growing demand for batteries to power electric vehicles (as well as for solar energy storage) has exceeded the capacity of world’s few battery suppliers. For instance, in 2017, Hyundai encountered unanticipated demand for the Ioniq EV which it was unable to satisfy because of short supply of lithium-ion polymer batteries.

The anticipated surge in demand for batteries and the need for a reliable supply chain in growth regions is attracting established and emerging battery manufacturers and fueling the growth of this industry. Not surprisingly,  seven of the global top ten battery manufacturers are Chinese. Aided by government incentives, they are responsible for a little over half of the global market share, whereas Japan and Korea produce 16% and 11%, respectively.

Moreover, the finite availability of scarce resources such as cobalt and lithium, and environmental concerns will create a growth market of electric vehicle battery recycling. By some estimates, the global electric vehicle battery recycling market will reach $2.27 billion by 2025 at 41.8% CAGR.

Image: Five Hammers (Wayne Thiebaud, 1972)