This analysis is by Bloomberg New Energy Finance analyst Claire Curry. It appeared first on the Bloomberg Terminal and on BNEF.com.
Lithium-ion battery manufacturers built large amounts of capacity in 2011, expecting significant demand from EVs. But passenger EV sales were lower than expected in 2011-H1 2015, meaning demand for lithium-ion batteries was low and the manufacturing industry suffered from oversupply. To increase utilization, manufacturers have been lowering prices and competing fiercely with one another, as well as targeting the electric bus market.
BNEF lithium-ion battery price survey, 2010-16 ($/kWh)
Notes: This includes cells plus pack prices
Source: Bloomberg New Energy Finance
However, BNEF forecasts an uptick in passenger EV sales that began in 2016 and will grow until 54% of passenger cars sold in 2040 will have a plug. This means large demand growth for lithium-ion batteries, which has led battery manufactures to announce further capacity build despite oversupply. They need to attract investment for this, although revenues from sales are still quite low, and then disclose how they plan to make profits from the new investment.
Implications on company strategy:
- Battery manufacturers need to improve profit margins to attract new investment. They can do this by improving technology to reduce production costs, and decrease cost forecasts. They are also entering the stationary storage market aggressively to increase market share.
- Car companies want to reduce battery prices to improve their vehicle economics. They can do this by signing large, long-term contracts with suppliers; by entering other battery markets, and repurposing used EV batteries for a second-life.
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