GlobalData’s Thomas Pothalingam on the critical battery industry

As electronic devices continue to proliferate, so too will batteries.

A​​​​​​​s electronic devices from smartphones to electric vehicles (EVs) continue to proliferate, so too will batteries.  

Already omnipresent, they are set to become ever more embedded in society – and one of the world’s most significant industries as a result, playing a key role in the fight against climate change.  

GlobalData analyst Thomas Pothalingam discussed the expanding battery industry, touching on the current state of the industry, key trends and China’s dominance in the market, among other things.

Thomas Pothalingam:​​​​​​​ The industry covers a battery’s life cycle, from raw materials extraction to materials processing and refining, component makers and battery technologies, alongside its recipient end markets, ending with end of life and disposal.  

Proprietary technology is definitely one of the most significant differentiating factors that determines success in the battery industry. As a result of this, many of the largest companies are investing heavily in research and development, alongside committing to mergers, and acquisitions, and engaging in venture capital investment. Any technological improvements that affect the efficiency, weight, temperature tolerance, safety, range, lifecycle, and sustainability of batteries will be seized and used to improve competitive performance.  

Lithium-ion (Li-ion) is the dominant battery technology for connected devices (e.g., laptops and smartphones), EVs, and renewable energy storage in the home. Li-ion batteries are the current standard for portable energy storage, whether in an electric car, a smartphone, or a wall-mounted power pack to supplement a house’s energy demand. Li-ion cells can store more energy for a given weight and volume than lead-acid or NiMH-based batteries and allow for faster recharging and discharging. These properties make them ideal for energy storage for electric vehicles, where great energy density in a lightweight package is essential.

Thomas Pothalingam:​​​​​​​ Six battery manufacturers will dominate the market in the mid-term – CATL, BYD, LG Energy Solution, Panasonic, Samsung SDI, and SK Innovation. They control nearly 90% of global production and are forming close ties with the top dozen or so auto companies that are becoming progressively more vertically integrated structurally. They already have long-established ties with major consumer electronics companies, led by Apple, which have driven the battery industry until now.  

A key industry driver for batteries is the growth in demand and production of Electric Vehicles (EVs). GlobalData estimates that by 2035, more than 50 million EVs will be produced every year, accounting for over 50% of the light vehicle market. Every major automaker has aggressive plans to phase out gas and diesel models in leading markets by 2035, reflecting government regulation and diktat. The global transition to EVs will need an accompanying battery gigafactory expansion, which must be located near vehicle assembly plants. GlobalData estimates that China accounted for over 72% of the world’s EV gigafactories in 2021, but this will fall to 50% by 2030. In contrast, Europe will increase its share from 8% to over 24%. Nevertheless, the real supply chain constraints for EVs—and batteries—come from the lithium mines, which take at least seven years to establish.

Thomas Pothalingam:​​​​​​​ Batteries are a crucial component of the transition to a lower-carbon emitting form of light-vehicle transport. As nations get serious about their ESG commitments, of which EVs are a significant component, batteries and the scale and range of their uses will grow. Nevertheless, there is an antagonism between the need to match the demand for battery metals and the immediate availability of sustainable and ethical battery metal supply chains. Those battery companies that can secure quality and ESG-conscious supply chains will avoid the reputational damage that those who do not certainly will.  

Energy storage will be critical to the green transition, but primary batteries will eventually be depleted, and secondary batteries can only be charged so many times before battery hardening renders the battery useless. There are then two options for a battery once it has reached the end of its life: disposal and recycling. Battery recycling is important from multiple standpoints. Fundamentally, the recycling of battery materials and components will increase the sustainability of the industry drastically, reducing reliance on raw material extraction. If we can reproduce batteries from 100% recycled materials, one would expect knock-on consequences of fewer mines, and miners, reduced energy and water usage, and lower carbon emissions.

Thomas Pothalingam: Technologically speaking, the battery industry is moving swiftly. Changes to the chemical composition of batteries, deploying previously theoretical advancements within battery cells, and novel forms of batteries are all happening now and will continue to be significant to the industry in the future. Advanced battery chemistries are also being developed that may offer advantages over commercially available batteries. Performance advantages include a lighter weight, higher energy density, broader temperature tolerance, extended life-cycle, and improved safety.  

Solid-state technology, quantum glass, liquid metal batteries, and the deployment of graphene and silicon are likely the most notorious improvements to cells as we know them currently. These tend to focus on the applicable benefits of improved charge times, longer life cycles, improved extreme temperature tolerance, safety, as well as sustainability. Battery alternatives are also growing in use and notoriety. Hydrogen fuel cells, thermal energy storage systems and ultracapacitors will increasingly appear and offer a myriad of benefits as both alternatives and compliments to the growing array of progressively more renewable batteries.

Thomas Pothalingam: It is undeniable that China leads the battery industry, from raw materials extraction to end of life and disposal, as well as everything in between. The two largest of the six most dominant cell producers, CATL and BYD, are Chinese companies and are well enmeshed with the Chinese state.  

China dominates the supply of graphite, a key material in the anodes of Li-ion batteries, holding between 75% and 80% of the global supply despite only having just over 16% of natural reserves. In addition, China has had a graphite surplus for some time, which has kept the material price from skyrocketing. This surplus is declining as China scales EV production, and the raw material price is expected to increase.  

Almost 100% of processed natural graphite anode material comes from China, and automakers such as Tesla have started to note how this will impact their profits. In December 2021, Tesla wrote to the US government to request a tariff waiver on graphite, saying that it could not obtain enough from US sources. The next five years will see the US and Europe, the latter led by Norway, striving to build their battery supply chains, particularly in Li, and develop, as noted, scaled-up battery and battery materials recycling capabilities. These national projects will take at least five years to bite and a decade to make a mark.