Electromobility More Batteries Than Needed

The market for battery cells is turning. There is overcapacity, according to a report by management consultants McKinsey. This has a positive effect on prices, but at the same time the train for cell production in Europe has finally left the station.

The chances of European cell production have been poor for some time. Almost all major projects are on hold, have been abandoned or have slipped into insolvency. Automotive Cells Company (ACC) is no longer pursuing its plans for Kaiserslautern and Termoli in Italy. The joint venture between Stellantis, Mercedes-Benz and Total Energies is sticking with production in Douvrin, France. The Porsche investment Cellforce will not be implementing its ambitious plans for the production of high-performance cells with silicon anodes. The Chinese manufacturer Svolt is abandoning its two planned sites in Saarland and one in Brandenburg.

The insolvency of the Swedish company Northvolt is likely to have received the most media attention. The plans for Northvolt Drei, a cell factory in Heide, Germany, were caught up in the maelstrom of the Swedish parent company's insolvency. It remains to be seen whether the announced takeover by the US manufacturer Lyten will go ahead as planned.

900 GWh of Overcapacity

The reasons for the failure include excessively high production costs, technical difficulties in ramping up production and overcapacity on the market. "For the past year, we see around 900 gigawatt hours (GWh) of overcapacity in the global market," explains Raphael Rettig. He is a partner at the management consultancy McKinsey and heads the Battery Accelerator Team. Last year, demand for storage capacity totaled around 2,000 GWh. The cells are used in electromobility, battery storage systems and electrical devices. Despite overcapacity, the volume produced will continue to rise. The consultants expect annual growth of around 13 percent. Global demand will increase to 4,200 GWh by 2030 and to 6,800 GWh by 2035. In addition to electromobility, stationary buffer storage systems used by energy producers and data centers are driving this growth.

Price Decline Slowed Down

Around 75 percent of battery cells currently come from Asian countries. Europe and the USA account for less than ten percent of production. The ramp-up of cell production and technical progress have led to a drop in prices. According to McKinsey, the weighted average per kWh for Li-ion battery packs was 108 US dollars last year. This is half the price that cell manufacturers were charging in 2018. At the same time, the energy density per cell has doubled in the past 15 years. The consultants assume that the price drop will not be as sharp in the future. "The price will fluctuate slightly, which can go both ways," emphasizes Rettig. In the long term, McKinsey expects a price of less than 60 dollars per kWh for Li-ion cells. "Overcapacity, lower material costs and the shift to LFP cells are the drivers," says Rettig.

LFP Wins

While nickel-manganese-cobalt (NMC) and nickel-cobalt-aluminum-oxide (NCA) have dominated cell chemistry to date, the cheaper lithium-ice phosphate (LFP) cell is catching up fast. "LFP is in high demand in smaller cars and stationary storage systems due to its lower costs," says Andreas Breiter, McKinsey consultant at the Center for Future Mobility in the USA. The consulting firm predicts a steep career for the LFP cell. Their estimate for 2035 is a market share of 59 percent for LFP compared to 38 percent for NMC/NCA. All three cell chemistries belong to Li-ion batteries, which are the dominant technology at 85 percent. It is interesting to note that the consultants give sodium-ion cells only an eight percent share of demand. "Yes, the raw materials are cheap, but salt as a charge carrier has a significantly lower energy density than lithium," says Breiter, "We will probably see this battery in the A-segment of cars and stationary storage systems."

China is not only ahead in terms of production, but also in terms of demand. Almost half of the cells produced in 2035 will be installed in China. The EU will account for 19 percent and North America 14 percent. The ramp-up of electromobility is slower than initially assumed. Due to the current political situation in the USA, development has almost come to a standstill. Expiring subsidies and the reaction of car manufacturers to political requirements are slowing down the drive turnaround. This will have an impact on the coming years. All the results and assessments of the management consultancy can be found in the report "Battery 2035: Building new advantages".

Solid-State Battery as a Combined Product

The consulting firm expects the first solid-state batteries to be ready for series production by 2030 at the latest. Semi-solid state, i.e. no longer liquid electrolytes, are likely to be used before then. The consultants expect solid-state batteries to have an increased energy density of between 400 and 450 Wh per kg. However, the cycle stability of this technology is likely to be even lower than before. "We will probably see different cell chemistries in one battery," says Rettig. He can imagine that solid-state cells will be used for long-distance journeys because they store more energy and charge faster. For everyday use, existing Li-ion cells or LFP cells will be used in the battery pack.

Production in Europe Too Expensive

Both consultants are less optimistic about battery cell production in Europe. "According to our findings, China will play the dominant role in raw materials, their processing, cell production and recycling by 2035," Breiter is certain. According to McKinsey's calculations, an LFP cell could be produced in Europe in 2035 at prices of between 60 and 85 dollars per kWh. However, the import price from China, including transportation costs, would be around 55 dollars per kWh by then.

A joint venture with a Chinese manufacturer to produce in Europe is probably the only way to achieve commercial success. Stellantis has also considered this. Despite the rejection of the ACC project, they are building a battery factory for LFP cells together with CATL in Figueruelas near Zaragoza with an investment volume of 4.1 billion euros (~$4.83 Billion). Production in the 50:50 joint venture is due to start at the end of the year. Manufacturing close to production sites should bring advantages despite higher labor costs. (se)

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