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Transportation Batteries - Global outlook to 2023
- 9. 2018 ∆ from 2017 Lead $2,242 -4% Lithium $12,500 -10% Cobalt $37,200 -34% Oil $/barrel BRENT $71 +31% PREVIOUS FOR 2022 CURRENT FOR 2023 ∆ in Outlook $2,500 $2,000 -20% $15,000 $8,500 -43% $90,000 $55,100 -39% $82 $87 +6%
- 10. 2018 2023 CAGR Value in billions $61 $142 18% Energy Content in GWh 819 1,258 9% $ Billions CAGR $128 20.4% 1,037 9.8%
- 13. 2018 2023 BEV 1.6 6.3 HV Hybrid 3.0 8.2 48V Hybrid 1.2 12.6 ICE – S/S 42.0 51.5 ICE – STD 47.2 24.4 TOTAL 95.0 103.0
- 18. Est. Fuel Savings New LV1 by 2023 HV Hybrids 20 - 25% 8.3 M LV 48V Hybrids 10 - 15% 12.6 M Stop/Start Systems >5% 51.5 M SAVINGS ON 70% of 103 M NEW VEHICLES
- 19. R 2018 2023 CAGR% Replacement Market 2 North America 80 85 1.2% Europe 3 53 50 -1.2% China 60 80 6% Rest of World 192 212 2% New Vehicles/Worldwide 95 103 1.6% TOTALS 480 530 2%
- 31. 2018 2023 CAGR Includes Lead-based $45 $55 4% AGM, Flooded, & Bi-Polar Lithium-based $16 $87 40% NMC, LFP, TOTAL $61 $142 18%
- 32. 2018 2023 Factory Cost Pb1 >700 GWh >800 GWh $300 Million Li >100 GWh >400 GWh ≈$2 - $3
Editor's Notes
- Thank you for having me back with the Battery Council where I will build on the work presented last year in Tuscon. The model behind this forecast is detailed, yet any forecast going out five years covering diverse batteries in such a dramatically shifting world for vehicles aims to be broadly accurate. I will share practical examples and insights to help you reach your own conclusions on battery demands across the diverse transportation vehicles.
- GLOBAL WARMING and emission reduction goals are shaping policies and preferences for transportation of people and goods. Though many will debate the best plans to reduce the rise in temperatures and the impact on society, almost all experts will agree more and BETTER BATTERIES are part of the solution to reduced fossil fuel use and the resulting carbon emissions. This includes improved LITHIUM and LEAD based batteries across the transportation industry, and also in a widening role to provide electricity efficiently worldwide.
- The strategic and product plans of car companies are more complicated than ever as they try to match long development cycles with so many changing and interacting influences. I believe the most important of these are the evolving Regulations and Technologies, complemented by Affordability. Some people or applications can fund any vehicle or delivery solutions, yet the larger markets for people and businesses are sensitive to total costs of use. Regulations, and the politics behind the policies keep changing, whether its in response to diesel issues in the EU, consumer preferences for large vehicles in the US and Australia, or to controlling the boom in unlicensed eBikes and Low Speed EVs in China. Technology and Innovations from ride-sharing and autonomous driving are enabling many solutions not many people believed feasible a few years ago.
- The FUTURE of TRANSPORTATION will include some very low cost EVs from China, like the KANDI, and the NURO autonomous delivery POD truck which will deliver your groceries or your teenager to soccer practice. For electric Harley Davidsons and Pickup Trucks, I am skeptical about high market share. More relevant now is forecasting how many of these changes will be accepted how fast onto the streets in Shenzhen, Calcutta and Mexico City where total costs will be critical, not just in the wealthier cities in Hamburg, Sydney and Chicago.
- How many of us would have forecast GM and FORD offering these electric options? You might receive a new ARIV eBike from GM as an incentive on your next SUV purchase, or a one year free subscription from FORD to use their new SPIN eScooter in many cities. Busy young people in crowded urban centers have new options they like enabled by Technology and ambitious innovators.
- Though I accept full responsibility for the comments and forecasts here, I have to thank the ten companies, plus the associations, agencies and advisors listed here with whom I have exchanged across the last four months. Also, a special thanks to the our son Dan Kubis who helped me with the model, and his firm, Roland Berger Associates, whose unique expertise helped me with the evolving vehicle technologies and respective forecasts.
- Let explain how the forecast model is built. To reach a value for global battery sales in terms of MONEY and ENERGY CONTENT there is a build up by vehicle application and technology. Shown here is an example for Commercial Vehicles or Trucks. Starting in 2018 from a global estimate of 78 million batteries, with an average content of 1.2 kWhs, at an average price of $58/kWH, you reach an estimated $5.4 billion sector representing 94 GWhs of energy content produced/sold that year. Then after studying all the input collected on the outlook we estimate average changes in units to be sold, and the probable evolution in battery size in these applications and their value per kWH across the next five years to arrive to 2023 estimates. Yes, there are a lot of educated guesses in the assumptions.
- Here are some key points, contrasted to last year’s outlook and also important messages. Our economies and the transportation sector are growing at a slower pace, yet no recessions are built into the forecast. Though China remains the largest global market, the highest growth rates for new vehicles are now in India and Brazil. Also, contrasted to last year, the critical battery raw materials are lower in cost. One thing has not changed is that battery demand growth forecast remains high at 18% compounded to reach $142 Billion by 2023. The highest growth of 40%/year is for lithium batteries into EVs and high voltage hybrids. The growth in value for lead based batteries is 4% per year to 2023. However - let me step back from the numbers and simply say MAYBE. The potential exists for the growth of advanced lead batteries to be higher, or actually decline notably by 2023. As I am about to offer some advice, let me first disclose my biases, and that starts with my two large direct personal investments in industry companies (1), that being Albermarle and Gridtential. 1. Albermarle is the leading global supplier of high grade lithium materials to the battery industry. The battery recipes and formats may change for better safety and performance, yet my logic is all the companies producing will need high grade lithium. 2. Gridtential is the Silicon Valley start-up of which I am the Chairman, which licenses technology to leading battery makers. By combining conductive silicon wafers with ever improving lead active materials, new advanced lead batteries will be a lot lighter with longer life, and much higher performance, rivaling lithium batteries in many applications. For over 30 years I helped large battery companies get bigger and better with many great teams and product ideas, and also sort through the many, often spurious claims of start-up battery technology companies. For the last three years, I have directly helped one start-up, and talked with many companies as we together analyzed how to address the growing and changing markets. Let’s say I have a decent perspective from both sides, as a large battery company, and more recently a start-up. In my opinion, on the lead-based side of the industry, WE TOGETHER are moving too slowly and inefficiently. There is some good work progressing at Argonne Labs, and at start-up companies, like Gridtential and others. And there are good reasons for healthy skepticism with advanced battery claims. And material science advances are hard. So is integrating new high speed processes. But the opportunity is really big, and the price of not moving quickly is very obvious and painful. I would point to three specific transportation battery markets - the 12v SLI and emerging 48v mild hybrid market along, with the golf car or LSEV market, where progress has to be demonstrated quickly if lead batteries are to sustain or increase their share. Not moving now means you need to be ready to start laying many in your workforces and write-down hundreds of millions in investments under reasonable scenarios in the years ahead. This is intended to stimulate critical discussions across functions in your companies. We can look across to NOKIA or KODAK or even IBM, who all had the terrific insight to the great new emerging technologies, yet could not internally break out of R&D analysis fast enough. My advice is to combine your best people with the best outside start-ups, and dramatically step up the funding, targets and timelines. Here are some product performance targets which broadly implies a doubling in the performance of advanced lead-based batteries at much lower costs. And many of these targets can be implemented through most of your existing major factories producing lead based. (1) For full disclosure, I also hold smaller investments in three other companies engaged in the changing transportation industry; BYD, Ford and Texas Instruments.
- Moving back to the forecast, material costs and supply chains are important building blocks to any battery forecast. A year ago, it appears we were at surge prices of lithium and cobalt, with analysts forecasting notably higher AND lower prices. Prices fell in 2018 for lithium, cobalt and lead. For the forecast assumptions this year I turned to the experts, and simply asked Neil Hawkes from CRU Commodities for their forecasts which are shown here. Though still expensive at $55,000 and $8,500 per ton for cobalt and lithium materials, these forecasts are about 40% lower than the five year view covered last year. Some tough issues remain around the supply of cobalt from the Democratic Republic of the Congo, yet this outlook assumes sufficient supply growth to fill the high demand for lithium batteries.
- The combined forecast shows similar high growth to what was outlined last year. There are not many large industries with growth of 18% per year in value. The annual energy content grows at 9% per year which is only half the rate of revenue growth primarily because of the shift in mix to far more lithium batteries where the cost is about triple the average cost of lead-based batteries in the forecast. To help put this annual output in energy storage content in perspective, it would take the equivalent of 1.7 billion 60 amp hour 12 volt batteries.
- Electric vehicles in many applications make sense, yet I am skeptical of the ALL ELECTRIC headlines we often see. This led me to do a little extra research on the power industry worldwide, because these cars need to charged regardless where you live or travel. The best source regarding energy information is the IEA, so I reviewed their annual 600+ page global review, updating my perspective on emissions, coal, renewables, etc. According to the IEA, total energy demand, boosted by economic growth, grew globally by 2.3% in 2018, with CO2 emissions still growing about 1.7% with as expected, electricity production, followed by transportation and general industry representing the largest use of energy and sources of emissions. Key trends included coal use which still grew in 2018, a continuing shift to low cost natural gas in many countries including the US, and further growth in solar and wind generation. A focus on better EFFICIENCY, whether from motors, lights or transportation was a key takeaway for me from the report, along with a perspective that about one-third of the often perceived CO2 reduction from pure EVs is offset by CO2 emissions back at the power producing plants.
- That IEA review led me one step deeper into an ongoing Fuel Efficiency Initiative, an IEA led group who has been tracking the evolution in the energy EFFICIENCY of light vehicles from 2005 to today for most of the new vehicles worldwide. This table summarizes the progress and target to DOUBLE the fuel efficiency from 2005 to 2030 of new vehicles sold. You can see the target by 2030 to reach 4.4 liters per 100 kilometers or about 53 miles per gallon, from those levels in 2005. Progress has slowed in some areas due to the dramatic decline in demand for diesel vehicles, shifts to preferences for larger vehicles, and lower gas prices. Yet there are many new efficient vehicles are being released which may get the world’s new vehicle output back on a more beneficial path. Japan showed the highest improvement in vehicle efficiency in 2017 based on their broad adoption of hybrid systems, not all electric vehicles.
- Let’s focus on the efficient evolution of light vehicles out to 2023, aided by Roland Berger. It is right to repeat that changes in Regulation, Technology or Costs could re-shape this forecast mix. Four highlights: Pure EVs would represent about 6% of the new vehicles sold worldwide in 2023, The highest growth in that sector are the low or 48 volt platforms, which increase ten-fold to over 12 million vehicles to 2023. The combined “Electrified” vehicles of EVs, plus High and Low Voltage hybrids are about 1/4 of new vehicles by 2023, Also relevant to many producers here, the Stop/Start or idle off technology, is estimated to be in place for over one-half the new Light Vehicles being sold.
- Here you can see a segmentation of EV vehicles, which was put together to rationalize how many of what vehicles for what reasons and price might be sold in 2023 based on all we see evolving now in launches and plans. Surely, there is a profitable high end market for car makers where battery enabled LUDICROUS acceleration (to borrow Tesla’s phrase), combined with great brands and features will be sold, many at prices well over $100,000, such as the new Porsche. Ps I doubt these are reducing CO2 emissions though. Maybe the mid-range segment is hardest to forecast, even if shown at 2 million by 2023, as the still relatively high vehicle cost vs. more efficient alternatives will be influenced by the changing technology and costs, including fuel and incentives. The low or budget segment, which we are already seeing emerging in China and elsewhere will likely (in my opinion) be the largest segment with vehicles from $10,000 in many Asian countries to $25,000 in many Western cities. For this segment, vehicle simplicity and cost for the shorter Urban ranges vs. IC engines, plus policy preferences, including reduced fees will be factors. The Chinese will probably lead this sector, and even Mercedes just partnered its struggling SMART car platform for development with a Chinese partner.
- Though EV sales are still growing quickly, one reason I am more cautious on the growth than many of the headlines is what we are seeing in the resale values of EVs. It may not matter to someone who can afford a $100k vehicle, yet for most of the car buying public it is another real cost factor. I was able study the best source for resale values in the US, the Mannheim reports which captures the wholesale transactions for car dealers. Cars retaining their value best are cars with great utility like JEEPS and Ford pick-up trucks, or cars with great reliability reputations from Toyota or Honda. When I studied the EV resale values through February, 2019, you found a far higher depreciation on EVs, which I surmise is due to primarily to three factors: Uncertainty on the possible very high battery replacement cost, Rapid pace of changes in technology and attributes of EVs including the Leaf, Teslas and from GM. And first, early adopter buyers are more willing to pay a premium, than value conscious used car buyers. These factors, which can easily mean an extra $1-2,000 a year in real cost of a vehicle may slow the rate of EV sales growth in favor of other efficient vehicles which also reduce emissions.
- Let’s look at some of the newest hybrids which save money and cut CO2 emissions. The new 2019 Honda Insight integrates an advanced 1.5 liter Atkinson engine with a high voltage battery pack and other advances to deliver 50 mpg, or already nearly achieve that 4.4 liters I referred to as the global target for fuel efficiency in 2030. Ford is launching this Summer its 2020 Explorer packed with its high voltage hybrid in many popular versions. It will deliver about 20% higher fuel economy than its ICE only engine predecessor and provide a range of about 500 miles on a single tank of gas. The new hybrid Highlander from Toyota also promises some great utility, luxury and efficiency.
- Low voltage hybrids, combining new 48 volt architectures and batteries, along with existing 12v systems are often described as delivering 2/3rds of the benefits of alternative systems for 1/3rd of the cost. In other words, they are relatively easy to implement and offer for low cost, and still yield real reduction in costs and emissions. We are now seeing these being launched worldwide across all vehicle price segments, with the biggest near term prospects in those areas with high fuel costs which often exceed $7 gallon or nearly $2 per liter. In the US the Ram truck series is one of the first in a large vehicle platform to include 48 volt architecture. It’s new eTorque version is feature rich for work and play, while still notably improving fuel efficiency by 12-15%. One example from China is a version of the popular Chang’an OSSO, which features a small engine, along with a 48V system and battery. The first wave of 48 volt vehicles are coming with Lithium 48v batteries and 12v advanced lead batteries, though as we have seen with Stop/Start technology, there is a real opportunity for alternative advanced lead batteries which can deliver cost savings.
- This table shows the scope of gains provided by the hybrid systems and also the Start/Stop innovations, all enabled by Better Batteries integrated with terrific engineering by car makers worldwide. EVs get all the headlines and most of the incentives, yet vehicles with these technologies are delivering huge improvements in CO2 and costs across the next decade, and I think we will see a lot more innovation in this space quickly which should appeal to regulators and buyers.
- Some companies asked me also to cover the more familiar SLI battery unit shipments, so here are three summaries. First, the replacement market statistics are a combination of association and company estimates, with China’s vehicle growth over the last five years predictably providing the highest growth rates through to 2023. At the OE level globally, we are still working with the assumption that EV batteries will include an auxiliary battery, though the recent briefs on the new Tesla Y vehicle suggest the 12v system may be eliminated there.
- OVERALL 2018 replacement market shipments in North America, returned to the modest growth of under 2%, which is the more normal result, interrupted by the periodic higher growth periods which we discussed last year. As all US manufacturers are aware, this past Winter season started very slow, and as Gary Taylor of Exide pointed out retail battery sales in December 2018, from the survey of 20 top US retailers actually showed a decline of over 15% from the prior year. Some of the inventory finally started moving with the arrival of the Polar Vortex that hit North America early in 2019.
- Shown here is the segment forecast in battery units for North America to 2023. The largest segment of light vehicle batteries continues to expand at under 2%/year to 85 million units. The highest growth seen recently and forecast is the growth in Commercial Truck batteries. As Tim Lawlor from East Penn explained, the combination of growth in large truck demand with the added impact of more and better batteries for idle off requirements and also truck cab comforts, has meant very good growth of these higher value batteries. One more detail, the forecast for lead-based golf cart batteries in transportation is for ZERO growth through to 2023. Though golf cart use is broadening and also growing for industry and personal transport, E-Z-GO and others have made impressive inroads with 48v lithium packs in 2018 and early 2019 which translates into lower replacement sales by 2023. Robust deep cycle batteries in the golf car sizes are often used in the growing renewable applications paired with solar generation, and in other non-transportation apps which may offer some growth.
- Let’s now focus on commercial vehicles where it appears real improvement in EFFICIENCY in costs and emissions reduction is being enabled by some great vehicle engineering and batteries. Starting with new SMALLER trucks, shown is the new hybrid FORD Transit which can quietly deliver people or goods for 30 miles through town in pure EV mode, and travel without range limits bolstered by a 1.0 liter engine (Yes, I said 1 LITER), representing a step-change in efficiency. Another example progressing is the Street Scooter series of 7,000 mail delivery trucks in Germany which was launched by the Post Office. Ford is now helping increase output following the performance through 2018.
- As we shift to larger trucks, the team at EATON Corp were helpful explaining truck segments by size and range shown here for the combined fleets of the US, EU and China. About 60% of all the larger trucks in the world’s three major markets are used for urban and regional delivery seen daily delivering eCommerce orders by UPS, DHL and others. In my opinion, it is in these larger volume platforms where the innovation and efficiency gains are forecast to progress the most quickly.
- The SAVINGS prospects for costs and emissions are easiest to envision when you think of the work and drive pattern of a city delivery truck, such as from FEDEX. The vehicles are stopped while the driver is selecting or dropping a box at the door, or sitting in heavy traffic over 50% of the time, yet the engine is running today. With the routes and range are well known, a whole range of stop/start, Hybrid and EV options are likely to progress, just as we are seeing with light vehicles. For the large trucks, and I know I am wrong sometime, I cannot support forecast high growth to pure EV trucks at this time. We understand the driver costs and shortage and safety systems coming, yet letting 25 tons barrel down the road at over a 100 kilometers an hour without a driver, sounds only good for lawyers in America. And what about COSTS and CO2 emissions? Most trucks today are constrained by weight, so putting in heavy batteries crowds out freight, pushing up the delivery costs per unit, unless you are delivering potato chips or plastics, and unlike private light vehicles which might be used 6-10,000 miles a year, big commercial trucks are used intensely, say 80,000 miles per year. This infers to me truck companies will face a huge cost to replace batteries every two years, unless some new technology evolves. And end to end studies for the production and recycling of these huge batteries for CO2 emissions are unlikely to be favorable.
- What about EV Buses? They are quite expensive initially, yet URBAN emissions, traffic and drive cycles provide some attractive case for adoption. Thus far, EV Buses are a Chinese story, representing with over 80% of the large buses in use globally (>over 10 meter length), often made by the BYD Company. In California a new regulation has been proposed requiring future new buses to be electric. Beyond the cost though, consumer preferences for travel is evolving with UBER, LYFT, eScooters and eBikes, which complicates planning for city officials.
- To help in planning and understanding, we have grouped three global vehicle platforms together shown here, even if the market drivers, use and costs are different. Yet, the similarities are clear, they are low speed electric vehicles, generally with 48V platforms, mostly with lead-based batteries today. E-Z-GO is the largest providers of ‘golf carts’; China’s large fleet of LSEVs is diverse and evolving, and INDIA’s fleet of eRickshaws is fast replacing the polluting small engines and feet power.
- China’s estimated 45 million fleet of LSEVs fit many families needs, or diverse alternate uses. Regulations can change quickly in China as to where they can be used, what batteries can be fitted, etc, yet overall the market is large and still growing, and CONVERGING you might say with the lower end of the REAL car EV market. India’s eRickshaw market is growing quickly as the taxi serving the first/last mile of transport, and some incentives have helped improve adoption and reduce emissions. The US market for golf carts serves more than golf course use, as industry and many senior communities find these transport options attractive and efficient. Notable in the US and Korea has been the rapid progress of 48volt lithium packs replacing lead batteries, advanced initially by E-Z-GO and now launched by Club Car. The simple leasing solutions, and marketed added value of energy and maintenance savings is truly changing the game in this sector.
- For simplicity we have also grouped the E-Bikes, E-Scooters and E-Motorcycles together. Huw Roberts of CHR Metals profiled the huge battery and lead demand (10% of global lead use) this sector has represented. China today represents over 90% of the battery volume worldwide in this sector today, and new regulations will now segregate this market by licensing requirements, weight and speed. Harder to forecast is how fast the world largest motorcycle market, India, or across the EU and the US, consumers will buy new electrified Hero, Harley and BMW motorcycles. The diverse range of pedal-assist e-BIKES also continue growing in urban centers across Europe and the US. Combining all these demands, this market sector for batteries is forecast to grow 3%/year with most of the growth to $10 Billion to come from outside of China.
- Having covered the key sectors, this chart depicts simply that EVs and Hybrids will represent about 67% or $100 Billion of the $142 billion in global battery sales by 2023 for transportation applications. The scale of investments in lithium based capacity has the prospect of further penetrating the market sectors now supplied by lead-based batteries, especially as producers may want to hedge their investments by serving different markets.
- This same data is illustrated to depict the the relative scale of the segments and lists the share of each sector for lithium vs lead-based batteries by 2023. It is widely acknowledged that pure EVs and high voltage hybrid applications will be principally lithium based batteries, with some nickel based systems from Japan and also some fuel cell powered clean vehicles. Our model assumes that for stop/start and SLI type applications in light vehicles and commercial trucks that advanced lead batteries will still be preferred based on performance, safety and costs. However, major initiatives by some companies may challenge advanced lead batteries. And the EU’s confounding regulations for End of Life Vehicles is a real threat to the large incumbent EU battery operations, even though today’s sustainability record for lead batteries is miles ahead of any lithium plans. By 2023, the 48V applications in light vehicles are forecast to be about $2 Billion in annual sales and increasing over 25% per year. My working assumption is that advanced, lead-based batteries of the bi-polar form will represent one half the OE market for 48 volt platforms by 2023 based on their premium performance, lower weight and low costs.
- Lithium batteries are forecast to represent about 2/3rds of the total value of the battery market for transportation by 2023, or $100 Billion supplied. This high growth rate assumes pure EVs only represent 6% of new vehicles. New capacity investments are accelerating across Asia and now in Europe and the US to support this demand. The sustained, albeit modest 4% growth rate of lead-based batteries assumes significant further progress by manufacturers in battery performance, to complement the relevant cost and sustainability credentials of lead based batteries.
- Published reports of the cost for giga-watt scale lithium factories have moderated from the earlier releases by Tesla, yet even $2-3 Billion per factory with extensive automation to better assure safety, along with large R&D investments for improvements, means this is a field for very large companies. With both of the principal pathways for improving lead-based batteries, being advanced active material designs and bi-polar architectures, it is possible to adapt existing factory capacity for modest relative investments. This is a huge opportunity for lead based manufacturers today, faced with the alternative of reducing capacity they are familiar with, and investing for lithium supplies against significantly larger companies with a decade head start in the space.
- Better batteries are already significantly helping innovative vehicle engineers reduce CO2 emissions and costs, yet clearly there is a great need and opportunity to do more. Lithium battery makers have to lower costs, improve safety and enable a comprehensive recycling scheme, which will be difficult, given the diversity of materials and designs. Makers of lead-based batteries have to accelerate product improvements while retaining their unique cost and sustainability strengths. The large tail of replacement lead battery shipments can create a false sense of complacency about the market changes ahead. I hope this forecast brief helps you with a look at the chances and challenges facing your business in the years ahead. I encourage you to pick your investment carefully, but to aggressively invest to further improve batteries for the changing markets at hand.