Updated: Aug 12
The electric vehicle (EV) market requires improvements to its whole ecosystem: battery production, vehicle assembly, charging station network, recycling & reusing.
As 30 % of the EV cost is the battery, decreasing the price of this component is one of the biggest challenges to the entire system. In the EU market, such giants as VW, BMW (1), MB (2) are aiming for 50% of their global sales to be zero-emission vehicles by 2030. Stellantis intends to reach even 70 % by 2030 (3). Let’s have a look at what they will face in the coming 8 years.
While the demand for EVs is increasing, the cost of battery components and inputs is rising even more, resulting in greenflation. Pursuant to the Goldman Sachs report of 9 March 2022 (4), the prediction is that the global EVs market will grow by 56% in 2022 in relation to 2021 (EV sales are expected to reach 6.9 mln v 4.4 mln recorded in 2021). While the top 5 global EV assemblers share 41% of the global sales, the top 5 global EV battery makers share twice as much of the market – a whopping 83%(4). Definitely, adding a few important players to the peloton of the battery suppliers could potentially increase competition and decrease prices.
Technological obstacles drive battery prices high as well. Engineers are working to develop cheaper batteries – such as the LFP type, but their “energy density” (i.e., how much energy there is in a battery/its kg) is 30 % lower than that of NMC batteries. LFP batteries stand for Lithium Iron Phosphate and their energy density typically hovers between 90 – 160 Wh/kg. NMC batteries, i.e., Lithium Nickel Canganese Cobal Oxide, require the use of cobalt and nickel, which are expensive and rare, but such a battery reports energy density of 150-220 Wh/kg(5). Further development of a new type of battery is desirable: ASSB (All Solid State Batteries) could make a change to the market (see: the Report).
In order to influence the drop in overall battery cost, automakers could seek to take over the production process (i.e. implement vertically integrated business models). However, according to the Report, such a strategy is not yet the norm. Most top battery producers partner with automakers through JV structures. For example (see: the Report): SK Innovation ventures with Ford, Hyundai and KIA, and LG Chem with GM and Hyundai. Only a few have announced to establish their own plants (e.g., VW and Stellantis).
Finally, the EV market growth depends heavily on the governments’ willingness to tighten the “zero emissions” policy and subsidize the market. For example, Norway recorded that 83.7% of cars registered in January 2022 were fully electric(6). This success is attributable to preferential tax breaks in Norway. Unfortunately, some countries have just announced cuts in subsidies, examples being the UK, which has decreased the amount of subsidies from GBP 2,500 to GBP 1,500/vehicle, and China, which has announced complete withdrawal from subsidies at the end of December 2022 (see: the Report).
While cheering for the EV market to grow, it’s also high time to think how recycling and reuse strategies can be improved. The life span of an EVs battery is estimated to be only 5-10 years. This is not a long time and it will pass quickly, so the development of this last mile element of the EV ecosystem should be aligned with improvements on its first stage.
(3) https://autovista24.autovistagroup.com/news/stellantis-targets-70-electrified-vehicle-sales-europe-2030/ (4) https://www.goldmansachs.com/insights/pages/gs-research/electric-vehicles-whats-next-vii-confronting-greenflation/report.pdf