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The global electric vehicle battery market size was USD 71.83 billion in 2019 and is projected to reach USD 82.20 billion by 2027, exhibiting a CAGR of 6.6% during the forecast period.
Owing to the improved battery technology, policy incentives, and the growing consumer interest to reduce vehicle carbon footprint, the share of electric vehicles (EVs) in the passenger car industry has increased over the past few years. The key determinant for increasing the driving range per recharge and reducing the cost of EVs is the development of electric vehicle batteries. To store more energy and to make them lighter and smaller, new cell chemistries are being developed for these batteries which would enable EVs to compete with the conventional vehicles.
Impact of COVID-19: Supply Chain Vulnerability for Crucial Electric Vehicle Battery Elements May Hamper Demand
China accounts for more than 75% of the global lithium cell manufacturing capacity and Chinese lithium reserves are around 30 times the U.S. levels. The outbreak of COVID-19 has resulted in a severe supply shortage of lithium for automakers such as PSA Group, Ford, and Fiat Chrysler among others which operate their production plants in the Hubei province, the initial epicenter of the virus. The pandemic induced lockdown is anticipated to reduce lithium-ion battery production output by 26 gigawatt-hours in China and has compounded the dependence of automakers on Asian battery manufacturers. Furthermore, the price of lithium hydroxide used in EVs has increased which is attributed to the logistical difficulties and greater production costs caused by the outbreak.
Previously, several European original equipment manufacturers (OEMs) used to focus only on packaging and research & development activities. They have avoided battery manufacturing themselves owing to the difficulties involved in setting up the production process, developing the correct battery chemistry, and sourcing the minerals to produce battery cells.
However, the pandemic has created a severe bottleneck for electric vehicle battery supply in the automotive industry. For instance, Audi citing this battery issue halted the production of its electric e-tron SUV and reduced its production target by nearly 1600 EVs to 4100 EVs for 2020. Similarly, Daimler and Jaguar Land Rover, owing to the unavailability of key elements such as cobalt and lithium have paused production of the Mercedes EQC and I-Pace electric SUV, respectively. It has impacted the profitability of these automakers.
Hence, efforts to diversify the supply chain for crucial elements such as lithium are expected to increase as a result of the pandemic and a short to mid-term supply shortage for such elements will result in the reduced production of EVs over the next two years.
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Advancement of Battery Chemistry Aimed at Improving EV Performance is the Current Trend
Currently, lithium-nickel-manganese-cobalt-oxide (NMC) is the commonly used composition in EVs. Additionally, lithium-nickel-cobalt-aluminum oxide (NCA) is used in popular EVs in the U.S. (Tesla model 3, S, and X) However, the adoption of new battery chemistries for EVs is increasing at a faster pace.
For instance, the adoption of lithium-nickel-manganese-cobalt-aluminum oxide (NMCA) composition is expected to start over in the next three years. They provide a longer life cycle and higher energy density, as compared to the equivalent NCA and NMC material. Hence, the development of advanced battery chemistry is a positive trend influencing the electric vehicle battery market growth.
Falling Price of Lithium-Ion Batteries to Augment Growth
Currently, the primary source of power for EVs is lithium-ion batteries. According to a study published by the U.S. International Trade Commission in 2018, lithium-ion batteries account for more than 70% of the rechargeable battery market. Additionally, the battery costs per kilowatt-hour (kWh) have declined to less than 200 USD in 2019 from around 1000 USD in 2010. Moreover, owing to the advancement of the battery pack manufacturing techniques and cell chemistry, battery costs are likely to decline below 100 USD/kWh by the end of the forecast period. Hence, a reduction in the prices of battery packs which are responsible for around 35% to 45% of EV manufacturing costs are expected to drive the growth of the market.
Stringent Emission Regulations to Fuel Adoption of Electric Vehicles
Electric vehicles hold a significant emission advantage over the conventional internal combustion engine vehicles attributed to the lack of transit-related emissions and the potential to utilize and develop renewable energy resources.
Furthermore, the increasing awareness regarding climate change has compelled policymakers to implement stringent fuel economy regulations and actively promote the development of electric vehicles via initiatives such as incentivizing cell manufacturing for batteries. Hence, vehicular emission concerns are anticipated to propel the adoption of EVs which would boost the growth of the market of electric vehicle battery.
Scarce Material Supply and Lack of Charging Infrastructure to Limit Adoption
Several minerals are necessary to store and utilize electricity as fuel such as manganese, cobalt, nickel, graphite, and rare-earth elements such as neodymium for which the supplies are geographically concentrated and substitutes are non-existent or limited. The growing demand for EVs is likely to lead to a short-term supply crunch for these essential battery components.
Furthermore, the lack of charging infrastructure is also a hurdle for the widespread adoption of EVs, particularly in emerging economies such as India. Additionally, the cost of installation is high and cost-efficiency for consumers to charge their vehicles is also not at the required level. Hence, the supply chain risks and the lack of charging stations are likely to restrain the growth of this market.
Lithium-Ion Segment Dominated the Market in 2019
By type, the market is segmented into lead-acid battery, lithium-ion battery (Li-Ion), nickel-metal hydride (Ni-MH) battery, and others. The lithium-ion segment held the largest share of the market in 2019. They offer higher energy density and do not suffer from memory effect (loss of maximum energy capacity owing to rapid recharge), as compared to Ni-MH and lead-acid batteries. Hence, the lithium-ion segment is expected to dominate the market of electric vehicle battery over the forecast period.
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HEV Segment Held the Largest Market Share in 2019 Backed by their Cost-effectiveness
Based on vehicle type, the market for electric vehicle battery is segmented into plug-in hybrid electric vehicle (PHEV), battery electric vehicle (BEV), and hybrid electric vehicle (HEV). The BEV segment is estimated to exhibit a higher CAGR, as compared to the HEV segment. The government agencies implementing quota systems and stringent fuel economy regulations, particularly in the emerging economies are likely to propel the adoption of BEVs which rely entirely on rechargeable battery packs.
The HEV segment held the largest electric vehicle battery market share in 2019. HEVs utilize electric drive technology to deliver reduced fuel consumption and eliminate dependence on charging stations. Hence, these factors, coupled with their significantly lower costs, as compared to BEVs are expected to lead to the dominance of this segment over the forecast period.
Asia Pacific Electric Vehicle Battery Market Size, 2019 (USD Billion)
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The market for electric vehicle battery in Asia Pacific is characterized by the dominance of China, Japan, and South Korea which represent the majority of the global production capacity for EV batteries. The European electric cars largely utilize batteries produced in South Korea and Japan owing to the similarity of their electric grid to the European average. Also, the majority of the electric vehicle batteries produced in China are used by the domestic market in China.
Furthermore, the global lithium cell manufacturing is heavily concentrated in China and more than half of the battery manufacturing gigafactories are based in China. Hence, Asia Pacific is expected to dominate the market over the forecast period.
The U.S.-based OEMs are focused on eliminating the supply chain risks and the concerns regarding battery sourcing from a single region such as China. For example, establishing nearby manufacturing plants such as the Gigafactory 1 in Nevada operated by Tesla in collaboration with Panasonic would allow the co-development of battery cells and packs, as well as the swift troubleshooting of issues related to these components.
Furthermore, in 2019, the U.S. government published a federal strategy to ensure a reliable and secure supply of critical minerals which directs the Department of the Interior to localize the production of 35 critical minerals that include nickel and cobalt. Hence, North America is expected to show good growth in the market.
LG Chem & Panasonic Corporation to Lead Stoked by Rising Investments in R&D Activities
Key players in the global market for electric vehicle battery include Samsung SDI, LG Chem, Panasonic, and BYD Company among others. The cost of the batteries continues to be a hurdle in increasing the affordability of EVs. Hence, companies such as LG Chem and Panasonic are investing heavily in R&D to lower the use of expensive cobalt in nickel-cobalt-manganese and nickel-cobalt-aluminum batteries.
Another example is CATL, which supplies lithium iron phosphate batteries to Tesla. The company is developing a battery that does not contain cobalt or nickel. CATL also supplies Daimler and Volkswagen and has partnerships with Honda and Toyota. The development of such batteries can enable widespread adoption in commercially popular EVs and reduced cost burden on manufacturers, as well as consumers. Hence, the increased investment in R&D of suitable alternatives to expensive electric vehicle battery elements is a key area of focus for the majority of manufacturers.
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The electric vehicle battery market research report covers a detailed analysis of the market and focuses on key aspects such as the leading companies, product types, and leading applications of the product. Besides this, the report offers insights into the market trends and highlights the key industry developments. In addition to the aforementioned factors, the report delivers an in-depth market analysis of several factors that have contributed to its growth over recent years.
Value (USD Billion) & Volume (Thousand Units)
By Battery Type
By Vehicle Type
Fortune Business Insights says that the global electric vehicle battery market size was USD 71.83 billion in 2019 and is projected to reach USD 82.20 billion by 2027.
In 2019, the Asia Pacific market value stood at USD 35.39 billion.
Registering a CAGR of 6.6%, the market will exhibit good growth in the forecast period (2020-2027).
The lithium-ion segment is expected to be the leading segment in this market during the forecast period.
The falling price of lithium-ion batteries is the key factor driving the growth of the market.
LG Chem, CATL, BYD Company, and Panasonic Corporation are the major players in the global market.
Asia Pacific held the highest share in the market in 2019.
The stringent emission regulations and favorable government subsidies for the manufacturing and use of electric vehicles are propelling the adoption of electric vehicle batteries.
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