One of our readers, Peter Egan, recently passed along this automotive lithium-ion battery supply chain report. It’s an interesting report that goes a bit deeper into the lithium-ion battery market than we normally dive. I pulled out 7–10 charts (depending on how you count) that I found quite interesting, and I’ve added notes about some of them in the captions.
It’s interesting to see here how much of global automotive lithium-ion battery production occurs in Asia, and it’s also interesting to see the big green circle over there indicating under-construction manufacturing capacity, but the most interesting thing on the chart is certainly the giant yellow circle, which represented the planned (now under-construction) Tesla/Panasonic Gigafactory.There are several interesting things to highlight here. It’s interesting to see how much global demand for automotive and grid lithium-ion batteries is expected to grow, but it’s also interesting to see how much more lithium-ion batteries for consumer electronics are expected to grow in demand, which will help to further bring down battery costs — for all sectors. Naturally, it’s interesting to look at this projection for how much the automotive and grid markets are projected to cut into the overall lithium-ion battery market.This is a shocking one to me. I had no idea there was so much overcapacity in this market. I guess it’s good to see (assuming this information is correct) that the capacity for battery production could handle a significant ramping up of demand (though, note that these data come from the beginning of 2014, and demand has increased a great deal since then).The interesting thing here is that GM indicated it would be getting lithium-ion battery cells from LG Chem for $145/kWh, and it’s widely assumed Tesla’s battery cells from Panasonic are coming in for a similar or even lower price. Either something is off here, or battery prices have dropped a lot in a couple of years — I’m assuming the latter.
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15 thoughts on “7–10 Lithium-Ion Battery Supply Chain Charts”
What would those chart look like in 5 – 10 years with carbon taxes added, for shipping etc.?
Would more local be cheaper or as competitive as off shore supply?
I’m glad there is so much production capacity. I was kinda scared that the battery industry can’t fulfill all that demand in 2016/2017, but it seems like they can fulfill a significant amount if not all.
At first glance, I have a lot of problems with these charts.
Benchmark Minerals (Simon Moore is the key researcher) has pointed out that growth in battery grade lithium and graphite has been about 27% CAGR since 2011, and seems to be continuing. Growth in announced plant capacity additions by all manufacturers worldwide out to 2020 matches that (28%) Why would they be adding more capacity if they already have way too much?
Navigant says growth in demand will be about 31%
If I eyeball chart 2 it says growth goes from about 25 to about 120 from 2011 to 2020 which is 19%. That is a big difference over time.
I know forecasters are a dime a dozen, but these charts raise concerns.
Yes. That graph is misleading. It represents the state of affairs reported in 2014. That means the data looks back a bit further than that. At that time, there was too much capacity. The Volt sales were low. The Leaf battery factory in Holland, Michigan was nearly idle. Quite a bit of capacity was slated for production, but there were few EVs and sales globally were not as good as forecast. So the factories came first. Now we are finally starting to see EV production volumes turn up. When you think about it, it probably had to happen that way. Thats what Tesla recognized. The only company that invested in its own battery facility. Now it will pay off handsomely.
Tesla made a windfall when it snatched up the NUMMI manufacturing plant.
It took guts to do that in a recession, even at cheap prices.
While installed capacity is high, technology in the supply chain must be advancing rapidly. Likely, new capacity has to be added, because existing capacity is quickly outdated by cheaper unit cost new technology.
PHEV and EV production is growing rapidly justifying larger capacity, lower unit cost machinery.
Also, different applications (phones/laptops, PHEVs, EVs) need different chemistry for safety, charge and discharge rate reasons. ((Tesla EVs use unique chemistry. Its Powerwalls use a different chemistry again.))
Regional integration of supply chains cuts distance and time and packaging costs for materials.
Panasonic is bringing a dozen of its suppliers to the Gigafactory – that is a very short supply chain. Elon talked of having trains bring raw materials and takeaway finished product. The implication is that all the non-voluminous processing of raw materials will take place at the Gigafactory.
While Mexico and China have cheap labour, Gigafactory will avoid a lot of unskilled labour in transport of materials and in packaging. Battery packs will leave the Gigafactory in racks on the back of a truck or train that will return to the factory – no packaging needed.
The supply chain example is for a PHEV. Their relatively small battery packs have high unit costs for pack manufacture.
Raw material processing is expensive. By bringing perhaps more than 80% of the battery pack supply chain value-add under one roof, Gigafactory will surely produce the world’s cheapest packs on a per kWh basis.
Great comment.
Where would batteries for cellphone towers and the like fit in? There must be a market for batteries in industrial electronics, and it doesn’t fit into any of the three categories.
Possibly because industrial electronics applications have different basic requirements (backup for occasional use during grid outages, rather than frequent cycling) and are more conservative, so they are sticking with chemistries that have a longer shelf life such as lead-acid, nickel-iron and (only at the cutting edge) sodium-ion. Moreover, it would be a very small market compared with consumer electronics and automotive.
Tesla represents a sizable chunk of those numbers. Consider, currently Tesla is rapidly approaching 100,000 vehicles per year. At about 100kwhr per vehicle, thats about 10GWhr. And actually, Tesla is shooting for 500,000 vehicles per year by 2020, but some of these may be the lower capacity model 3. Even considering the lower capacity, that pencils out to 25GWhr. If LGChem is doing about 450,000 vehicles by then, its 10% less. So that would make it 45GWhr for those two alone, annually by 2020, if they meet those goals. That does not consider the other battery players which are smaller right now, like BYD. That is likely to change as Chinese EVs make inroads domestically.
Now lets take storage. The already have 800 million in storage orders. Thats about 3GWhr. Those numbers give some insight into the size of these developments. Consider that BYD is installing a 500MW storage installation in Lancaster, probably about 2GWhr.
The graph shows 39GWhr auto by 2020. It shows 10GWhr storage.
So the Overview Market graph appears reasonable, if not conservative. There appears to be room for those factories planned or built today to be at less than full capacity by 2020.
A peak at the subtitle in the graph describing utilization reveals why it shows such low battery factory utilization. Its from 2014. There has been an epic shift since Tesla announced the Model X and PowerWall got tremendous orders.
I don’t think one could claim the GigaFactory is underutilized. 😉
Tesla has about 4 gigawatt-hours of batteries pre-ordered in the form of Powerwalls and Powerpacks. For example.
I would expect China to outdo the West in terms of kWh per year manufactured. EVs sales are taking off in China. Add in the electric buses they are building along with the tens of millions of electric motorcycles they produce.
Take Tesla + LG Chem and double it. Then add some more.
Keep in mind that BYD uses lithium iron phosphate batteries – these graphs only analyse lithium ion batteries… so it might still be accurate.
Otherwise a good analysis though!
There is little or no discussion of capacity in lithium mineral production. This will be the bottleneck for the whole value chain for years to come. Spot prices for lithium carbonate and lthium hydroxide have doubled in the last months. I strongly recommend a followup article on the status and future of lithium mining and refining at the source.
Tesla have contracted Lithium carbonate/hydroxide supply from a new mine in Nevada which allows it to finance development. It appears cobalt is the most expensive material in their batteries. Several mines recently opened in Australia.
Ugh. The first picture made the idiot mistake of using the *radius* of the circle to represent the size of the factory, so it’s completely misleading.
What would those chart look like in 5 – 10 years with carbon taxes added, for shipping etc.?
Would more local be cheaper or as competitive as off shore supply?
I’m glad there is so much production capacity. I was kinda scared that the battery industry can’t fulfill all that demand in 2016/2017, but it seems like they can fulfill a significant amount if not all.
Edit: That article is a good addition: http://cleantechnica.com/2015/05/06/10-biggest-electric-car-battery-manufacturers-are/
At first glance, I have a lot of problems with these charts.
Benchmark Minerals (Simon Moore is the key researcher) has pointed out that growth in battery grade lithium and graphite has been about 27% CAGR since 2011, and seems to be continuing. Growth in announced plant capacity additions by all manufacturers worldwide out to 2020 matches that (28%) Why would they be adding more capacity if they already have way too much?
Navigant says growth in demand will be about 31%
If I eyeball chart 2 it says growth goes from about 25 to about 120 from 2011 to 2020 which is 19%. That is a big difference over time.
I know forecasters are a dime a dozen, but these charts raise concerns.
Yes. That graph is misleading. It represents the state of affairs reported in 2014. That means the data looks back a bit further than that. At that time, there was too much capacity. The Volt sales were low. The Leaf battery factory in Holland, Michigan was nearly idle. Quite a bit of capacity was slated for production, but there were few EVs and sales globally were not as good as forecast. So the factories came first. Now we are finally starting to see EV production volumes turn up. When you think about it, it probably had to happen that way. Thats what Tesla recognized. The only company that invested in its own battery facility. Now it will pay off handsomely.
Tesla made a windfall when it snatched up the NUMMI manufacturing plant.
It took guts to do that in a recession, even at cheap prices.
While installed capacity is high, technology in the supply chain must be advancing rapidly. Likely, new capacity has to be added, because existing capacity is quickly outdated by cheaper unit cost new technology.
PHEV and EV production is growing rapidly justifying larger capacity, lower unit cost machinery.
Also, different applications (phones/laptops, PHEVs, EVs) need different chemistry for safety, charge and discharge rate reasons. ((Tesla EVs use unique chemistry. Its Powerwalls use a different chemistry again.))
Regional integration of supply chains cuts distance and time and packaging costs for materials.
Panasonic is bringing a dozen of its suppliers to the Gigafactory – that is a very short supply chain. Elon talked of having trains bring raw materials and takeaway finished product. The implication is that all the non-voluminous processing of raw materials will take place at the Gigafactory.
While Mexico and China have cheap labour, Gigafactory will avoid a lot of unskilled labour in transport of materials and in packaging. Battery packs will leave the Gigafactory in racks on the back of a truck or train that will return to the factory – no packaging needed.
The supply chain example is for a PHEV. Their relatively small battery packs have high unit costs for pack manufacture.
Raw material processing is expensive. By bringing perhaps more than 80% of the battery pack supply chain value-add under one roof, Gigafactory will surely produce the world’s cheapest packs on a per kWh basis.
Great comment.
Where would batteries for cellphone towers and the like fit in? There must be a market for batteries in industrial electronics, and it doesn’t fit into any of the three categories.
Possibly because industrial electronics applications have different basic requirements (backup for occasional use during grid outages, rather than frequent cycling) and are more conservative, so they are sticking with chemistries that have a longer shelf life such as lead-acid, nickel-iron and (only at the cutting edge) sodium-ion. Moreover, it would be a very small market compared with consumer electronics and automotive.
Tesla represents a sizable chunk of those numbers. Consider, currently Tesla is rapidly approaching 100,000 vehicles per year. At about 100kwhr per vehicle, thats about 10GWhr. And actually, Tesla is shooting for 500,000 vehicles per year by 2020, but some of these may be the lower capacity model 3. Even considering the lower capacity, that pencils out to 25GWhr. If LGChem is doing about 450,000 vehicles by then, its 10% less. So that would make it 45GWhr for those two alone, annually by 2020, if they meet those goals. That does not consider the other battery players which are smaller right now, like BYD. That is likely to change as Chinese EVs make inroads domestically.
Now lets take storage. The already have 800 million in storage orders. Thats about 3GWhr. Those numbers give some insight into the size of these developments. Consider that BYD is installing a 500MW storage installation in Lancaster, probably about 2GWhr.
The graph shows 39GWhr auto by 2020. It shows 10GWhr storage.
So the Overview Market graph appears reasonable, if not conservative. There appears to be room for those factories planned or built today to be at less than full capacity by 2020.
A peak at the subtitle in the graph describing utilization reveals why it shows such low battery factory utilization. Its from 2014. There has been an epic shift since Tesla announced the Model X and PowerWall got tremendous orders.
I don’t think one could claim the GigaFactory is underutilized. 😉
Tesla has about 4 gigawatt-hours of batteries pre-ordered in the form of Powerwalls and Powerpacks. For example.
I would expect China to outdo the West in terms of kWh per year manufactured. EVs sales are taking off in China. Add in the electric buses they are building along with the tens of millions of electric motorcycles they produce.
Take Tesla + LG Chem and double it. Then add some more.
Keep in mind that BYD uses lithium iron phosphate batteries – these graphs only analyse lithium ion batteries… so it might still be accurate.
Otherwise a good analysis though!
There is little or no discussion of capacity in lithium mineral production. This will be the bottleneck for the whole value chain for years to come. Spot prices for lithium carbonate and lthium hydroxide have doubled in the last months. I strongly recommend a followup article on the status and future of lithium mining and refining at the source.
Tesla have contracted Lithium carbonate/hydroxide supply from a new mine in Nevada which allows it to finance development. It appears cobalt is the most expensive material in their batteries. Several mines recently opened in Australia.
Ugh. The first picture made the idiot mistake of using the *radius* of the circle to represent the size of the factory, so it’s completely misleading.