Hardly any other market is currently growing as quickly as that for electric car batteries. By 2030, the global battery market will grow at a total growth rate of 34 percent per year. Around 80 percent of the demand for the coveted lithium-ion batteries will come from electric vehicles in the next few decades given the shift in transport. This is shown by a new study by management consultancy Roland Berger and RWTH Aachen, which is available exclusively to manager magazin. Asian cell manufacturers such as CATL and BYD from China, LG from South Korea and Panasonic from Japan have a big lead. National legislation increases the imbalances in the market, so that the production capacities and needs of the countries, especially in the USA, China and Europe, are currently developing significantly apart. Wolfgang Bernhart (61), consultant at Roland Berger, explains in the mm interview what this means for battery cell manufacturers in Europe.
manager magazin: Mr. Bernhart, the automotive world is waiting for the Chinese manufacturers’ electric offensive. At the same time, will the Chinese try to dominate the market for the most important parts of vehicles: the battery cells?
Wolfgang Bernhart: At least they are building up enormous capacities, as we show in our study. Even if not all of them China If the announced capacities of around 6,000 gigawatt hours of energy are realized for 2030, even 4,000 gigawatt hours could be used to equip 60 to 70 million average electric vehicles – more than the entire global market demand.
That sounds absurdly high.
That would at least be significantly more than the Chinese market can absorb.
What would be the consequence? Falling prices, probably.
Even if not all projects are realized, the cell manufacturers would look for other markets. And this export pressure could only find its outlet in Europe. The USA are out of the question due to political barriers such as high tariffs.
What does this mean for European battery cell producers and suppliers?
You will be under enormous pressure. You have to reduce costs faster than previously planned; and they have to increase quality at the same time. Otherwise they will have a very difficult time, especially against giants like CATL or BYD. The same applies to suppliers of other components for electric cars.
Wolfgang Bernhart
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Photo: Sandra Wolf
Wolfgang Bernhart has been a partner at the management consultancy Roland Berger since 2007 and an expert in the automotive industry. He advises numerous customers from the entire automotive and mobility sector and has been involved in over 70 projects worldwide along the entire value chain of lithium-ion batteries – from mining to the cell to recycling.
European governments are striving for greater independence for manufacturers and suppliers from China. Is this even possible in the medium term? Can cell manufacturers in Europe produce at a cost level comparable to imported cells from China?
If you take all costs into account, including transport and customs duties, it can work. This also applies to the projects of the major car manufacturers. That’s why the big Korean cell manufacturers like LG ES and Samsung in Europe for a long time, and that is why Chinese players are now also building up capacities here.
The same applies to materials that are central to batteries, such as cathode materials.
Exactly. It won’t be easy, but the Europeans can keep up with these components too. European manufacturers sometimes buy their materials cheaper than the Chinese.
Their scenarios show that the supply of battery cells in Europe and North America is not yet secured despite China’s giga-expansion. How does that fit together?
There is currently no threat of bottlenecks given the weak demand for electric cars. In North America and Europe, some cell manufacturers have already laid off employees…
LG has one in a US factory Laid off 10 percent of its employees
. And SK On also cut more than 100 jobs in a US factory; …
However, supply is not yet secured in the medium term. Firstly, the announced works do not yet exist. And secondly, the big Chinese suppliers deliver high quality. But we don’t yet know whether car manufacturers can rely on the newcomers from China.
This is what European newcomers like Northvolt, the ACC joint venture and the Volkswagen-Subsidiary Powerco also not yet proven.
No, they are not yet delivering large quantities. In this respect, it is quite possible that supply will become more difficult again. Anyone who thinks that there is guaranteed to be more than enough capacity and, if in doubt, they can buy from China is acting negligently. It’s not quite that simple, at least not for the auto industry.
Who has it easier?
The capacities for the batteries for electronic devices should be sufficient for the time being.
In an earlier conversation you said, that there is a risk of bottlenecks, especially with lithium. Are you more optimistic now?
At the moment we no longer expect a huge problem; A number of large mining projects have been started. So the lithium should be enough. We see somewhat higher risks in refining capacities outside of China. Even temporary bottlenecks in such systems could lead to wildly fluctuating prices.
The USA is promoting the construction of battery cell factories with a massive funding program, the Inflation Reduction Act (IRA). Companies from countries that are considered political opponents are not supported and are sometimes even blocked. Your study states that the IRA is shifting the focus of Chinese investment to Europe. Where is this development already visible?
Many Chinese cell manufacturers such as CATL and Svolt are coming to Europe and some have already started building plants. Cathode manufacturers are also looking for locations in Europe or Morocco. From there there are no import duties into Europe.
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Transporting an electric car battery from CATL in China: The Chinese cell manufacturer recently put a factory in Thuringia into operation
Photo: Li Bo / Xinhua / IMAGO
Do you really expect the Chinese to leave the American market to South Korean cell manufacturers like LG ES?
The American market is becoming difficult for Chinese manufacturers. They are currently looking for ways to become active there. But whether this will be tolerated in the long term is uncertain and depends on political developments. The Koreans now have a decent lead over companies like Northvolt, which are only now entering the USA Canada go. When it comes to subsidies through the IRA, companies whose factories are already up and running or producing have a clear advantage.
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From February 2024, new regulations will apply in the EU to all batteries sold here. In particular, the regulations on the sustainability of raw materials are becoming stricter. Do local players have an even harder time competing when the requirements are so high?
I don’t think they are generally too high. The only question is what is possible. The EU regulations are already having a positive effect, and it goes well beyond Europe: Asian cell manufacturers are also paying much more attention to their CO₂ emissions – because customers demand it, especially in Western Europe. In addition to costs, sustainability is the most important criterion when selecting upstream suppliers.
more on the subject
The EU Commission is currently investigating the extent to which China supports manufacturers of electric cars with state subsidies and thus distorts competition in the European Union when it comes to exports. Could this also impact the battery market?
Rather not. I rather expect the adjustment of tariffs and effects on the vehicle market. In China the import duty is 15 percent, in Europe it is 10 percent for vehicles from China. This difference makes no sense. But the export restriction on graphite can be read as a reaction to the EU investigation…
…an important raw material used in the production of lithium-ion batteries. China now requires special export permits for this.
Correct. The government may be saying: If you put pressure on us, we can do it too.