The Battery Series
Part 3: Explaining the Surging Demand for Lithium-Ion Batteries
The Battery Series is a five-part infographic series that explores what investors need to know about modern battery technology, including raw material supply, demand, and future applications.
Explaining the Surging Demand for Lithium-Ion Batteries
In Parts 1 and 2, we examined the evolution of battery technology as well as what batteries can and cannot do. In this part, we will tackle demand in the rechargeable battery market, with a major focus on the rapidly growing lithium-ion segment.
For many decades, lead-acid batteries have been the most important rechargeable batteries in our lives.
Even in 2014, about 64.5% of all revenues in the rechargeable battery market were from lead-acid sales, mainly to be used for automotive starters.
Despite not being the most energy dense batteries, lead-acids are proven and can supply high surge currents. They are also extremely cheap to manufacture, costing around $150 per kWh of energy capacity.
The first lithium-ions were not cheap. In fact, early batteries produced commercially in the mid-90s typically costed upwards of $3,000 per kWh of energy.
Luckily, the cost of lithium-ion batteries has come down dramatically, making it the battery of choice for consumer electronics throughout the 2000s. And recently, scientists have made even more progress, opening the lithium-ion to many more applications, namely in electric vehicles.
In 2008, analysts estimated that lithium-ion battery packs costed $600-$1,200 per kWh, but this range would drop to $500-800 per kWh over the following four years. Tesla now claims that a Tesla Model S battery cost is $240 per kWh and that the expected cost for a Model 3 is $190 per kWh.
At $240 kWh, lithium-ions become competitive with $3/gallon gas. At $150, they are even competitive with $2 gas.
Giant megafactories such as Tesla’s Gigafactory 1 will also help bring economies of scale to lithium-ion production, making them even less cost-prohibitive. Soon battery packs will cost closer to $100 per kWh, which will make them essentially cheaper than all gas-powered vehicles.
Demand for Lithium-Ion Batteries
Major advancements in lithium-ion battery technology have been a game-changer. Cheaper, more-effective lithium-ions are now taking over the battery market.
In 2014, lithium-ions made up 33.4% of the rechargeable battery market worldwide, worth $49 billion. By 2025, it is estimated by Bernstein that the rechargeable battery market will more than double in size to $112 billion, while lithium-ion’s market share will more than double to 70.0%.
The key driver? The automotive segment.
In 2010, the automotive sector was a drop in the bucket for lithium-ion battery sales. Five years later, automotive made up more than $5 billion of sales in a sector worth nearly $16 billion.
The EV Goes Mainstream
In 2015, almost half a million cars were sold in the US with an electric drive component.
14% of these sales were battery electric vehicles (BEVs):
- 71,000 Battery EVs (14%)
- 43,000 plug-in hybrids (9%)
- 384,000 hybrids (77%)
= 498,000 electric drive vehicles
But as a part of total US auto sales, BEVs still made up less than 1% of sales:
- 71,000 battery EVs (0.4%)
- 43,000 plug-in hybrids (0.3%)
- 384,000 hybrids (2.3%)
- 16,900,000 gas/diesel sales (97%)
However, in the near future, this is expected to change fast. By 2040, approximately 35% of all global sales will be BEVs.
This will put electric vehicle sales at close to 40 million per year globally, meaning a lot of energy will need to be stored by batteries. Bloomberg New Energy Finance expects that at this point, that electric vehicles will be pulling more than 1,900 TWh from the grid each year.
How much is 1,900 TWh? It’s enough to power the entire United States for 160 days.
And to meet this demand for lithium-ion powered vehicles, a massive amount of battery packs will need to be manufactured.
Part 4 of The Battery Series looks at which materials will be needed to make this possible.
Palladium: The Secret Weapon in Fighting Pollution
The world is in critical need of palladium. It’s a crucial metal in reducing emissions from gas-powered vehicles, and our secret weapon for cleaner air.
Despite the growing hype around electric vehicles, conventional gas-powered vehicles are expected to be on the road well into the future.
As a result, exhaust systems will continue to be a critical tool in reducing harmful air pollution.
The Power of Palladium
Today’s infographic comes to us from North American Palladium, and it demonstrates the unique properties of the precious metal, and how it’s used in catalytic converters around the world.
In fact, palladium enables car manufacturers to meet stricter emission standards, making it a secret weapon for fighting pollution going forward.
The world is in critical need of palladium today.
It’s the crucial metal in reducing harmful emissions from gas powered vehicles—as environmental standards tighten, cars are using more and more palladium, straining global supplies.
What is Palladium?
Palladium is one of six platinum group metals which share similar chemical, physical, and structural features. Palladium has many uses, but the majority of global consumption comes from the autocatalyst industry.
In 2018, total gross demand for the metal was 10,121 million ounces (Moz), of which 8,655 Moz went to autocatalysts. These were the leading regions by demand:
- North America: 2,041 Moz
- Europe: 1,883 Moz
- China: 2,117 Moz
- Japan: 859 Moz
- Rest of the World: 1,755 Moz
Catalytic Converters: Palladium vs. Platinum
The combustion of gasoline creates three primary pollutants: hydrocarbons, nitrogen oxides, and carbon monoxide. Catalytic converters work to alter these poisonous and often dangerous chemicals into safer compounds.
In order to control emissions, countries around the world have come up with strict emissions standards that auto manufacturers must meet, but these are far from the reality of how much pollutants are emitted by drivers every day.
Since no one drives in a straight line or in perfect conditions, stricter emissions testing is coming into effect. Known as Real Driving Emissions (RDE), these tests reveal that palladium performs much better than platinum in a typical driving situation.
In addition, the revelation of the Volkswagen emission scandal (known as Dieselgate) further undermines platinum use in vehicles. As a result, diesel engines are being phased out in favor of gas-powered vehicles that use palladium.
Where does Palladium Come From?
If the world is using all this palladium, where is it coming from?
Approximately, 90% of the world’s palladium production comes as a byproduct of mining other metals, with the remaining 10% coming from primary production.
In 2018, there was a total of 6.88 million ounces of mine supply primarily coming from Russia and South Africa. Conflicts in these jurisdictions present significant risks to the global supply chain. There are few North American jurisdictions, such as Ontario and Montana, which present an opportunity for more stable primary production of palladium.
Long Road to Extinction
The current price of palladium is driven by fundamental supply and demand issues, not investor speculation. Between 2012 and 2018, an accumulated deficit of five million ounces has placed pressures on readily available supplies of above-ground palladium.
Vehicles with internal combustion engines (ICE) will continue to dominate the roads well into the future. According to Bloomberg New Energy Finance, it will not be until 2040 that ICE vehicles will dip below 50% of new car sales market, in favor of plug-in and hybrid vehicles. Stricter emissions standards will further bolster palladium demand.
The world needs stable and steady supplies of palladium today, and well into the future.
Animation: U.S. Electric Vehicle Sales (2010-19)
This stunning animation visualizes the last nine years of U.S. electric vehicle sales. We also look at who will lead the race in the coming years.
It’s challenging to get ahead, but it’s even harder to stay ahead.
For companies looking to create a sustainable competitive advantage in a fast-moving, capital intensive, and nascent sector like manufacturing electric vehicles, this is a simple reality that must be accounted for.
Every milestone achieved is met with the onset of new and more sophisticated competitors – and as the industry grows, the stakes grow higher and the market gets further de-risked. Then, the real 800-lb gorillas start to climb their way in, making competition even more fierce.
Visualizing U.S. EV Sales
Today’s animation uses data from InsideEVs to show almost nine years of U.S. sales in the electric vehicle market, sorted by model of car.
It paints a picture of a rapidly evolving market with many new competitors sweeping in to try and claim a stake. You can see the leads of early successes eroded away, the increasing value of scale, and consumer preferences, all rolled into one nifty animation.
The Tesla Roadster starts with a very early lead, but is soon replaced by the Nissan Leaf and Chevrolet Volt, which are the most sold models in the U.S. from 2011-2016.
Closer to the end, the Tesla Model S rises fast to eventually surpass the Leaf by the end of 2017. Finally, the scale of the rollout of the Tesla Model 3 is put into real perspective, as it quickly jumps past all other models in the span of roughly one year.
The Gorilla Search
While Tesla’s rise has been well-documented, it’s also unclear how long the company can maintain an EV leadership position in the North American market.
As carmakers double-down on EVs as their future foundations, many well-capitalized competitors are entering the fray with serious and ambitious plans to make a dent in the market.
In the previous animation, you can already see there are multiple models from BMW, Volkswagen, Honda, Fiat, Ford, Toyota, Nissan, and Chevrolet that have accumulated over 10,000 sales – and as these manufacturers continue to pour capital in the sector, they are likely posturing to try and find how to create the next mass market EV.
Of these, Volkswagen seems to be the most bullish on a global transition to EVs, and the company is expecting to have 50 fully electric models by 2025 while investing $40 billion into new EV technologies (such as batteries) along the way.
The Chinese Bigfoot?
However, the 800-lb gorilla could come from the other side of the Pacific as well.
Source: The Driven
Chinese company BYD – which is backed by Warren Buffett – is currently the largest EV manufacturer in the world, selling 250,000 EVs in 2018.
The Chinese carmaker quietly manufacturers buses in the U.S. already, and it has also announced future plans to sell its cars in the U.S. as well.
How will such an animation of cumulative U.S. EV sales look in the future? In such a rapidly evolving space, it seems it could go any which way.
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