Lithium-ion batteries - The bubble bursts - Stuttgart, October 2012
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Lithium-ion batteries –
The bubble bursts
Stuttgart, October 2012
Li-Ion-Batteries_Bubble_final_E.pptx 1
SUMMARY
Consolidation in the lithium-ion battery (LiB) market is inevitable –
Stakeholders need to revise their strategies
A The large-format lithium-ion cell market will face overcapacity and price wars:
- Demand is lower than expected
- A lot of capacity has been built up – but new equipment to be installed will be
more efficient
- Prices are down to 180 and 200 EUR/kWH in 2014/2015
B Bottom-up calculations show that with an expected EBIT margin at or below 5%,
"early movers" in particular cannot generate enough EBIT to finance their cost
of capital
New developments on the material side (mainly cathodes, electrolytes/separators)
as well as in production technologies will lead to further cost reductions – but
require more cash for introduction and industrialization
C Therefore only the already large players or companies will survive the shakeout,
as their parent companies might be willing to provide the business with sufficient
capital
That's why cell manufacturers as well as their customers – the OEMs – need to
rethink their strategies
Source: Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 2A DEMAND
OEMs will increase xEVs sales significantly in the short term –
Toyota will remain the main player
OEMs xEV sales plans by xEV type [m units]
Hybrid light HEV1) BEV Comments
• Figures are a
summary of OEMs'
2.6 sales targets for their
xEV programs
• They do not include
1.3 sub-A-segment
vehicles (vehicles not
classified as
1.1 38% "passenger cars")
25% 0.8 0.3 80%
• Sales targets tend to
0.6 be on the optimistic
17% 1.3
0.3 side – but were not
0.7 adjusted by Roland
0.1
Berger
2011 2015 2011 2015 2011 2015
OEMs excl. Toyota Toyota xx CAGR 2011-2015
1) FHEV, PHEV
Source: Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 3A DEMAND
However, in one 2020 scenario, xEVs will represent only a minor
share of powertrains in EU, US and China – Introduction delayed
Base scenario: xEV market share in the EU, US and China, 2020 [%]
COMMENTS
• Market share calculated based on an
assessment of push (legislation-driven) and
70%
pull (customer-driven) factors for xEVs in the
EU, US and China
• The market shares shown represent the
minimum required xEV share to meet push
95% and pull in each region – Higher xEV market
97% shares are possible and even likely
• The EU's xEV market share achieves the level
26%
required to meet EU CO2 emissions targets in
an aggressive scenario regarding ICE
optimization and driving resistance reduction
0% 2% 0% • The US's and China's xEV market shares are
1%
2% 2% 1% 1% 1% primarily required to fulfill pull factors for xEVs
0%
• Further legislative action might increase share
• Japanese/Korean figures expected to fall
between the US and EU
Conventional incl. Start-Stop FHEV BEV/RE
Hybrid Light PHEV
Source: Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 45
A DEMAND
The EU's xEV market is primarily legislation-driven – The US and
China are driven primarily by customer pull
Summary of push and pull factors for xEVs
1 EU 2 USA 3 China
• Even under optimistic assumptions • CAFE emissions targets can be met by • Technology penetration is driven only by
regarding ICE improvements and light- utilizing ICE improvements and some government targets for PHEVs and EVs
weight measures, all OEMs will need weight reduction technology – OEMs • Fuel consumption targets can be met by
xEVs to comply with 2020 CO2 also have no cost incentive to apply xEV
PUSH
optimizing ICE in all segments
emissions targets technologies on a large scale
• Fleet emissions are possible, but there
• In terms of costs, hybrid light and • However, the ZEV mandate and the is no clear indication yet
PHEVs are most favorable ability to earn credits will lead OEMs to
• If fleet emissions will be set, high xEV
build at least some PHEVs and EVs
penetration expected
• No TCO advantage for FHEV, PHEV or • No TCO advantage for xEV powertrains • Almost no customer pull for xEVs –
BEV powertrains due to low fuel costs except in luxury segment
• Hybrid lights will become neutral as • However, some customers are willing to • Light and full hybrids would offer
regards TCO, but will provide additional pay for xEVs for environmental image significant consumption advantages, but
PULL
functions reasons TCO advantage is limited due to low
• In larger-car segments, customers will cost of fuel
be willing to pay more for higher • No willingness to pay for "green" image
performing hybrids – in luxury segment, innovativeness of
• Only niche demand for BEVs xEVs is an important purchase criteria
Source: Interviews; Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 5A DEMAND
To meet CO2 emission targets, OEMs will mostly introduce xEV only
according to the cost of CO2 emission reductions in their fleet
Assumption for xEV usage at OEMs to comply with EU CO2 emission regulation
Gap between CO2 fleet Cost of cutting CO2
emissions and CO2 targets Usage of xEVs types to close the gap at OEMs1) emissions2)
108 2020 CO2 0 OEM will offer xEVs in segments to fulfill customer
emission requirement and skim willingness to pay – Hybrid light
in large/luxury cars and minor share in medium size
cars, PHEVs in large/luxury cars, BEVs in mini/small
cars
101
2020 CO2
1 Intensify usage of hybrid light in medium size and
emission
small cars and PHEV usage in larger cars
target
2 Expand PHEV usage to medium size cars
3 Increase EV penetration in smaller cars and
expand usage to medium size cars
0 High
OEM
1) Based on interviews, validation with TCO calculations
2) Assessment is based on a calculation of xEV CO2 emission reduction potential, customer willingness to pay and cost (components and other cost)
Source: Interviews; Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 6A DEMAND
Hybrid light will become at least TCO neutral – Buyers of large/
luxury vehicles will be willing to pay for full hybrids and PHEVs
Pull factors for xEVs Europe, 2020
Vehicle COMMENTS
size
• Assessment of TCO is
Luxury Esp. sport cars based on a detailed
calculation – taking into
account necessary uplift
CO2 emissions limits of 200% on material
Large in company car fleets
cost for OEMs to
maintain EBIT margin
Medium per vehicle
• Willingness to pay in
large and luxury segment
Small is driven by social
pressure to be environ-
mental compliant and
Mini additional functions
enabled by xEV power-
trains (e.g. comfort start-
Light Full PHEV EV
stop, idle AC)
xEV type
TCO neutral/advantage to best ICE-technology Willingness to pay Other reason
Source: Interviews; Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 7A DEMAND
A significant share of powertrain electrification are stop-start and
micro-hybrid systems – but here, LiB are not competitive
• Conventional starter batteries cannot be used effectively in start-stop and
micro-hybrid applications due to poor cycle life and poor charge acceptance
• Initially, most of the start-stop systems used a 2 battery approach in order to fulfill
the requirements: 1 conventional starter battery (for starting only) plus 1 AGM
battery for power supply. Problems are cost for 2 batteries and limited life of the
AGM battery – Lithium Ion cell makers did expect a chance here
• Recent developments in Lead-acid batteries (called Enhanced Flooded Battery )
have now be presented and are likely to become a viable and cost effective
solution for start-stop and micro-hybrid applications
• Companies like JCI, Exide, Banner, Moll, Shin Kobe, GS-Yuasa and others will
probably be able to offer Lead-based products that will meet start-stop and
micro-hybrid requirements exceeding 200,000 km or 6 to 8 years of operation
at lower system costs than lithium-ion batteries.
Source: Roland
Source: Berger
Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 8B CELL ECONOMICS & TARGET PRICES
Price levels around 200 EUR/kwH (approx USD 250) in 2015 do not
provide sufficient EBIT to finance cost of capital
Typical 96 Wh PHEV cell – Cell cost structure 2015
Cell P&L breakdown, 2015 Cell material cost split, 2015
Total cost: approximately USD 22.1/cell (~ 237 USD/kWh) USD 13.4/cell
EBIT
~24%
SG&A 5% of total cell 39% Cathode
Overheads 10% costs)
Labour
6% 1%
Energy/Utilities 0% 18% Anode
58% 13% Electrolyte
18% Raw material
D&A Equipment
0% 19% Separator
2%
D&A Building 11% Housing and feed-througs
Quality / Evironmental Material cost
breakdown
1) Including carbon black content, foil and binder cost
Source: Roland Berger LiB Value Chain Cost model 2011 Li-Ion-Batteries_Bubble_final_E.pptx 9B CELL ECONOMICS & TARGET PRICES
Our calculation takes into account declining material prices–
Driven by strong competition to capture market shares
Impact on the cell manufacturing material prices (mid-term - 2015)
IMPACT FACTORS ON PRICES
Price
Input Raw material Process Standardization Competition/ Overall per kg
materials cost cost1) capacities impact 2015
2) • NMC 25 $
CATHODE • LMO 15 $
• NCA 35 $
• 18 $
ANODE (50-50 mix)
SEPARATOR
• Solution:
ELECTROLYTE 20 $
(LiPF6:25-30$)
Increasing the price Limited impact Decreasing the price Overall strong price decrease
1) Investment, energy, labor 2) Process cost reduction potential for LFP available
Source: Roland Berger "Battery material cost study V.2.4 / Q1 2011" Li-Ion-Batteries_Bubble_final_E.pptx 10B CELL ECONOMICS & TARGET PRICES
Material manufacturer need to improve their materials to drive
down costs – resulting in additional R&D demand on cell level
Manufacturing cost calculation 2015 [USD/kg]
TMC1)
2)
~32.5 ~25.5 ~24.5 ~23.7 ~22.8 ~17.5 ~12.8 ~20.2 ~19 Comment
4% 4%
7% 8% 5% • According to latest analyst
4% 5% 5%
10% 7% 5% reports the prices of Nickel,
12% 13% 13% 14% Cobalt and Manganese will
15% 16% 17%
10% decline through 2015
12% 21%
13% 13% 14%
15% • Largely as a result thereof CAM
2% 16%
2% 20% material costs will decrease by
2% 2% between 7% and 22% between
22%
3% 2011 and 2015
2% • The costs of LFP will increase
73%
66% 64% 63% 62%
largely as a function of higher
57% 54% energy and utility costs which
49%
40% account for 30% of total cost
• If high-capacity materials
(HCMA) is ready by 2015, this
will offer a significant cost
LCO NCA NCM NCM NCM LFP - LMO HCMA3) HV advantage over other CAMs due
111 523 424 FePO4 spinel4) to higher energy density
[USD/
~56.49 ~34.49 ~37.8 ~36.54 ~35.27 ~34.12 ~27.3 ~20.4 ~27.46 compounded by lower material
kWh]
cost
Quality/Environment Maintenance D&A Other D&A Equipment Energy/Utilities Labor Raw materials
1) Total manufacturing costs 2) High quality differences 3) not available until >2015 4) not available until 2020
Source: Roland Berger LiB Value Chain Cost model 2011 Li-Ion-Batteries_Bubble_final_E.pptx 11B CELL ECONOMICS & TARGET PRICES
Declining cell prices will result in massive pressure on cell and CAM
manufacturer margins - not enough to finance costs of capital
Typical 96 Wh PHEV cell – Cell price breakdown 2015 [US $ / cell]
Comment
Other CAM Cell Cell Market
Cell cost Delta
materials1) CAM cost margin margin price price2)
• For a typical CAM
7.5% 6.0 % manufacturer
23.3
22.1 1.2 1.3 22.0 – Raw materials account for
2.3 up to 55% of total cost
2.1 – D&A and utilities account
4.3 for up to 25% of total cost
13.4
0.4 0.3 • For a typical cell
8.2
4.6 manufacturer
– Raw materials account for
up to 58% of total cost
– D&A and utilities account
for up to 19% of total cost
Other Cathode CAM CAM Cell Cell Labor/ Cell Cell Cell Cell Market Market
material SG&A margin material D&A utilities SG&A cost margin Price price price
cost cost • In view of their limited ability
Margin pressure to offset sales price declines,
• Any price decrease beyond 24 USD / cell (lower than EUR 200 / kWh) will CAM and cell manufacturers
have direct impact on CAM and cell manufacturer margins will compete over a shrinking
profit pool
1) Anode, separator, electrolyte, housing 2) Expected market price based on expert interviews
Source: Roland Berger LiB Value Chain Cost model 2011 Li-Ion-Batteries_Bubble_final_E.pptx 12B CELL ECONOMICS & TARGET PRICES
To significantly reduce cell costs beyond 2015, major innovations
in CAM technology and introduction of new CAMs are necessary
Typical 96 Wh PHEV cell – Impact of material improvements on cell prices
(cost for Auto. customers)
Comment
NCM cell NCM cell Potential cost HCMA cell
2015 Cost reduction NCM cell 2015 – 2020 2020 reduction HCMA 2020 • Const. cell energy (at 96 Wh)
assumed
(230 204
USD/kWh USD/kWh • In 2016 introduction of higher
density NCM CAM, resulting
-6% -10%
in:specific cell energy increase
22.1 1.0 to141 Wh/kg and concurrent
0.4 0.1 20.8 19.9 reduction in NCM usage to 113 g
5.2 0.9
4.3 3.4 • In 2018 introduction of high-density
HCMA CAM: further increases
specific cell energy to 144 Wh/kg
with HCMA usage to 100 g
16.9 16.5 16.5 • HCMA price includes a license fee
of 2%
• No changes in anode, separator
and electrolyte cost assumed in
NMC Manu- Energy Labor NMC HCMA HCMA figure:
cell cost facturing density1) cell cost cell cost add. potential 10..20$ /kWh
2015 2020 2020
• Add. cell manufacturing process
Innovation pressure improvement: potential ca. 10..15$
• Unless HCMA material is introduced, further price reduction potential of CAM materials is / kWh
limited and margins remain at unacceptable level • Cell price forecast 2018..2020:
• Also cell manufacturer need (and will) improve processes and yield rate 200$ / kWh (incl. approx. 15%
CAM cost share 1) Based on a high-density 50-50 mixture of NCM 111 and LiNiO2 margin for both CAM and cell
manuf.)
Source: Industry reports, experts interview, Roland Berger analysis
Li-Ion-Batteries_Bubble_final_E.pptx 13 13C IMPLICATIONS
The value chain is therefore expected to further consolidate (1/2)
TODAY (2012) CHANGES BY 2020
Raw materials > Oligopoly > Some selected new players
Lithium > New recycling companies
mining > Business models integrating recycling
Anodes, > Dominated by Asian > New players (from specialty chemical
Cathodes, (Jap.) players sector ) especially for Automotive and
Separators, > Partially specialized ESS
Electrolytes precursors sourced > More integration of precursor
and > Some cathode manufacturer
Precursors materials > Cathode manufacturing by cell
manufactured by manufacturer only for top 2..3 with
cell manufacturer large chemical business
Source: Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 14C IMPLICATIONS
The value chain is expected to further consolidate (2/2)
TODAY (2012) CHANGES BY 2020
Battery cells / > Some JVs > Massive consolidation (cost
stacks disintegrating pressure, innovation)
("LiB manuf.") > Established players
gaining share, > Auto-Cell manuf. JV's as exemption
research spin-offs
with public & IPO
funding leaving the
market
Battery > Mainly by OEMs (JVs > Increased outsourcing, but still
assembly LiB) inhouse dominated by in-house assembly
> Selected supplier – > Some cell manufacturers try to deliver
LiB JVs larger part of system (incl. electronics)
> Limited LiB alone as Tier-1
Source: Roland Berger Li-Ion-Batteries_Bubble_final_E.pptx 15Li-Ion-Batteries_Bubble_final_E.pptx 16
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