EV batteries: balancing innovation and supply chain challenges

The automotive industry is targeting higher energy capacity, lighter weight, cost efficiency, and enhanced safety.

The battery pack is a critical component in electric vehicles. It stores electrical energy to power the vehicle and is comprised of several cells with battery and thermal management systems, safety features, and electrical connections.

The increasing demand for battery pack applications is being driven by the rapid growth of the electric vehicle market. This surge is primarily due to the urgent need to significantly decrease the average CO2 emissions of vehicle fleets, reduce urban air pollution, and align with governments’ ambitious targets for carbon neutrality. Governments worldwide encourage EV adoption by implementing stricter emission regulations and offering incentives for purchasing EVs.

According to Yole Group, the total annual demand for battery packs for EVs is projected to soar from 625 GWh in 2023 to approximately 1,600 GWh by 2029. The growth of electric vehicles depends on the level of vehicle electrification, reflecting diverse market dynamics and driving forces. Battery electric vehicles (BEVs) are projected to make up 90% of total demand in GWh by 2029, with PHEVs accounting for only about 10% due to their smaller battery capacity per vehicle and lower demand.

Dive deep into the perspective presented by Shalu Agarwal, Ph.D., Senior Technology & Market Analyst, Power Electronics and Batteries at Yole Group. This analysis has been extracted from the new report, Battery Pack for xEV 2024.

Higher energy capacity, cost optimization, and excellent safety… A real impact on battery pack’s technological development

The EV battery pack is indeed a crucial component in the EV industry, requiring high power and energy density, reliability, cost-effectiveness, compactness, and safety. The performance of a Li-ion battery pack depends on various factors, such as battery chemistry, energy and power density, charge/discharge efficiency, and cycle life. The market is witnessing ongoing innovations in manufacturing processes, material selection, safety measures, and structural design challenges, leading to continuous advancements. High-range EVs commonly use lithium-nickel-manganese-cobalt-oxide (NMC) and lithium-nickel-cobalt-aluminum-oxide (NCA) as battery cathode chemistries. Additionally, cobalt-free lithium iron phosphate (LFP) batteries are gaining popularity. The modular approach, where multiple cell modules are connected, is the most common method of integrating cells into a vehicle to form the battery pack. Another approach is the cell-to-pack method, where cells integrate directly into a pack without intermediate modules. Companies like BYD, CATL, LG Energy Solution, Tesla, Hyundai, SAIC, and Nio are involved in cell-to-pack approaches, with some players like CATL, BYD, Nio, Tesla, and Xiaomi exploring the cells-to-chassis approach, where cells integrate directly into the vehicle body.

Temperature is crucial for lithium-ion battery safety, performance, and longevity, and a proper battery thermal management system (BTMS) is necessary to address thermal concerns and enhance overall performance. Liquid cooling-based BTMS is commonly used in electric vehicles, and innovations in battery cell and pack designs and advancements in BTMS are needed to address the challenges posed by cooling large-capacity battery packs and the demand for fast charging.

Shalu Agarwal Senior Technology & Market Analyst, Power Electronics and Batteries at Yole Group
The battery management system (BMS) is a critical component of EV battery packs. It plays a crucial role in enhancing the overall lifespan and performance of the batteries while addressing safety concerns. It is essentially an electronic control circuit that oversees and regulates the charging and discharging processes of the batteries.

Additionally, the BMS safeguards the batteries from deep discharge and overvoltage and performs cell balancing. In the context of EV battery packs, the modular master-slave topology is the most employed BMS configuration.

The development of highly reliable and fast-reacting circuit protection components is being driven by the need to increase the energy capacity and power capability of battery packs. Currently, fuses are the preferred protection solution for battery packs due to their low cost. However, there is a demand for quicker and resettable solutions to improve safety and reduce maintenance costs. Key players in the safety component industry include ABB, Eaton, Littelfuse, Mersen, and TE Connectivity.

Overproduction of batteries in China is a concern not only for other countries but also for China

The EV market is experiencing rapid growth, with Asian companies dominating cell production in gigawatt-hours (GWh).

Battery pack market – Key figures

China holds a 60% market share in the global production of Li-ion batteries, followed by South Korea with 25% and Japan with 7%. As of 2023, Chinese company CATL leads in xEV battery cell manufacturing, while BYD has seen a significant increase in its market share, jumping from 13% in 2022 to 16% in 2023. Following closely are Korean company LG Energy Solution and Japanese company Panasonic. Europe and the USA lag behind China in the electric vehicle (EV) battery industry due to their higher manufacturing costs. This is mainly because of lower material costs in China, which results from more advanced supply chains that integrate material supply, processing, and manufacturing.

Shalu Agarwal from Yole Group
Compared to the USA, Europe faces higher manufacturing costs due to expensive electricity and limited availability of raw materials.

Manufacturing capability status

Today, many battery manufacturers plan to expand their manufacturing capacity, with global battery manufacturing capacity projected to exceed 6.5 terawatt-hours (TWh) by 2030, more than four times the global demand for batteries. However, the actual level of cell production may not align with these announcements, as some projects are primarily intended to attract funding, joint ventures, or mergers and acquisitions. Most of the capacity expansion plans have been announced by Chinese companies, with established players such as CATL, BYD, and EVE leading the way.

Consequently, the market is expected to experience a significant oversupply of batteries, potentially leading to underutilized factory capacity and subsequent price reductions for manufacturers. This oversupply could also result in long-term dependency on China and impact startup or small-scale battery manufacturing companies.

Shalu Agarwal from Yole Group
The surplus production of batteries in China has raised concerns not just among other nations but also within China. The battery market has become fiercely competitive and chaotic, resulting in a rise in the number of financially struggling companies in China.

It is worth noting that China’s electric vehicle market is currently facing a situation reminiscent of that experienced by the photovoltaic sector a decade ago, adds Shalu. Numerous companies have gone bankrupt, leaving only the most cost-effective ones to weather the storm.

What’s happening in Europe & North America?

In addressing the consequences of China’s overproduction of batteries, both Europe and North America are increasing their battery manufacturing capacity with the aim of reducing their reliance on China for electric vehicle batteries. Europe is focused on developing local cell suppliers, while US car manufacturers are primarily partnering with Asian suppliers.

For example, there are partnerships between TESLA and Panasonic, GM and LG Energy Solution, Ford and SK ON, and GM and Samsung SDI. The US government has proposed various incentives under the Inflation Reduction Act (IRA) to boost local production and value creation in EV industries and has enacted a regulation called “Foreign Entities of Concern” (FEOC) to reduce subsidies for vehicles using Chinese-made battery components.

EV batteries: what we could expect…

As the adoption of electric vehicles continues to soar, the demand for lithium-ion (Li-ion) battery packs is projected to experience substantial growth in the coming decades. The market for EV battery packs has witnessed significant transformations and exciting advancements in recent years. Currently, there is no universal standard for Li-ion battery packs, as companies have made diverse technological choices for components, encompassing cell chemistry, size, formats, thermal management systems, and battery management systems. Presently, battery production is predominantly led by China, South Korea, and Japan, and many countries rely heavily on China for their Li-ion battery supply. To tackle this challenge, numerous countries, particularly in Europe and the US, are striving to boost local battery production and are offering various incentives to reduce their dependence on China.

The future is uncertain, but action is essential. Yole Group’s analysts are dedicated to deepening their battery & power electronics research and expertise. They focus on the evolution of the EV industry and the latest innovations, meticulously analyzing the strategies of leading companies in the expanding EV market.

Stay tuned on!

About the author

Shalu Agarwal, PhD., is Senior Technology & Market Analyst, Power Electronics and Battery at Yole Group.

Based in India, Shalu is engaged in the development of technology & market products as well as the development of custom consulting studies.

Shalu has more than 15 years’ experience in Electronic Material Chemistry. Before joining Yole Group, she worked as a project manager and research professor in the field of electronic materials, batteries and inorganic chemistry.

Shalu Agarwal received her master’s and Ph.D. in Chemistry from the Indian Institute of Technology (IIT), Roorkee (India).

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