Monday, March 20, 2017

The Great Battery Race

BYD displays an electric car. (Photo Credit: Alan Trotter via Flickr) Click to Enlarge.
The coming of cheap and effective lithium-based batteries will cause the greatest changes in the energy and automobile sector since Henry Ford built the model T, writes Gerard Reid, founding partner of Alexa Capital, financial analyst and co-founder of the Energy and Carbon blog.  But European countries like Germany and France have no significant production, in contrast to China, which views batteries and their raw materials as key factors in the global competitive energy and transport race.

Batteries have been around for more than one hundred years but thanks to the smart phone they have become important enablers of our modern lives.  As battery technology improves they will become critical components for powering our automobiles as well as become vital assets for our power system.

The Chinese government has a clear strategy and technology roadmap for all EVs to have a minimum range of 300km in 2020 and 500km in 2030

In fact, the coming of cheap and effective lithium based batteries will cause the greatest changes in the automobile and energy industies since Henry Ford first built the Model T.  This is an opportunity for many new startups but it is also a threat to not only incumbent automobile manufacturers but to whole nations, many of whom are deeply dependent on value chains that may not exist in the future.  Positioning in this great battery race is thus critical for all companies and countries involved in the value chains of energy and transport.

Tesla and BYD
The global automobile industry with over 50 global brands is dominated by 14 manufactures, household names such as GM, Toyota and Ford, not to mention a similar number of major parts suppliers such as Bosch and Delphi.  None of these companies, however, have any battery manufacturing experience and all have been slow to embrace the electrification of the automobile which is today led by a US company in Tesla and a Chinese company in BYD both of whom not only manufacture cars but also batteries.

At a national level, there are three countries: China, South Korea and Japan which dominate over 90% of global lithium ion battery production, which is the chosen technology for electric and hybrid automobile manufacturers.

In stark contrast, Germany the home of the world’s largest car manufacturer VW as well as BMW and Mercedes has no significant production.  Instead these companies are buying their batteries from Samsung and LG Chem in South Korea and Panasonic in Japan.  But it is not just Germany; France, the home of Peugeot and Renault and Italy the home of Fiat-Chrysler also have no battery production.

For the countries that produce key raw materials, such as Chile and Australia, there is a real opportunity  to become the next Saudi Arabia

China, on the other hand sees the electrification of the automobile and batteries as a clear way for the country to gain a competitive advantage in the global automobile industry.  As it stands its batteries are not as good as those coming out of Japan or South Korea but the government is clearly focussed on reducing this technology gap.  The Chinese government has a clear strategy and technology roadmap for all EVs to have a minimum range of 300km in 2020 and 500km in 2030.  But it is not just in battery production where China is focussed; they are also focussed on gaining access to key raw materials such as cobalt and lithium.

Meanwhile in Japan and South Korea the focus is on getting to scale quicker and on keeping a technological advantage over the Chinese particularly around so-called ternary batteries chemistries such as NCM (LG Chem) and NCA (Panasonic and Tesla), which are the best technologies currently available for automobiles.  

Read more at The Great Battery Race

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