The demand for battery-powered electric vehicles is reaching an all-time high and the battery sector also offers interesting investment opportunities. Our electric vehicle impact assessment highlights this ongoing trend in detail. You can find the most important facts and findings of the report here.
Data from the International Energy Agency (IEA) shows that almost a quarter of global CO2 emissions are caused in the transport sector. Consequently, road transport is one of the biggest levers for reducing emissions, both for the transport of people and goods. EV batteries and battery electric vehicles (BEVs) are considered the two most important solutions for decarbonising road transport. Rising fuel prices and the political intention to phase out internal combustion engine vehicles (ICEVs) are driving the demand for them.
The increased ecological focus of governments and companies has pushed up the sales of electric vehicles since 2020. In the fourth quarter of 2020, global sales exceeded the one million mark for the first time in history, with growth of 134% compared to the previous year. Estimates predict a total market of more than USD 800 billion by 2050, which, according to the International Energy Agency, would correspond to almost two thirds of the total oil market in 2020.
EV batteries are one of the most important solutions for decarbonising road transport. The production of lithium-ion batteries has become significantly cheaper in the last ten years. Unlike solar and wind power, which are now the preferred options for new power generation capacity globally, EV batteries are still a few years away from achieving cost parity with internal combustion engines. Further economies of scale are potentially possible here in the future. Battery prices have fallen significantly since 2010, at around 89%.
The established value-added chains of automotive manufacturers and their suppliers are at risk due to the transition from a value-added chain for vehicles with combustion engines (ICEVs) to a value-added chain for battery-powered electric vehicles (BEVs). The reason for this is that many drive components are irrelevant for BEV powertrains and need to be replaced. For example, Tesla integrates the mining and extraction of the raw materials required for the batteries and relies heavily on vertical integration. One thing is certain, within the electric vehicle value-added chain, established automotive manufacturers must review their value-added chain strategy and take significant make-versus-buy decisions.
The price of mid-range electric cars is currently 30 to 50% higher than that of combustion engines. As a result, most OEMs today do not make a profit by selling electric vehicles. However, they can reduce manufacturing costs by making batteries more efficient, improving power electronics and electric motors through integration and scalability, and reducing indirect costs by increasing annual production volumes.
Today, start-ups in particular have the opportunity to enter the automotive market with relatively low capital expenditure. They benefit from lean cost structures, can develop an electric vehicle and at the same time outsource production, bring new technologies into production or take over individual areas of the value-added chain. On the other hand, traditional car manufacturers have to maintain production lines for electric vehicles in parallel with those for combustion engines, making them less agile.
One of the main risks for the high-profile battery manufacturers is local oversupply due to overinvestment, which in turn can reduce their profitability for battery manufacturers. Margins could come under pressure in conjunction with potentially higher commodity prices. Last but not least, technological innovations such as hydrogen drives or silicon anodes may pose a potential threat to manufacturers of electric vehicles.
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