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Electric vehicle boom to trigger spending of $560 billion to build Li-ion battery factories this decade
Published in The Saudi Gazette on 10 - 06 - 2021

The adoption of electric passenger vehicles is expected to be instrumental in a global frenzy to beef up the world's Li-ion battery manufacturing capacity to meet surging demand.
Together with other forms of electrified transport and storage applications, annual demand for batteries will approach 7 terawatt hours (TWh) in 2030.
Given that factory capacity stood at just 0.76 TWh at the end of 2020, investments of some $560 billion are likely needed to cover the shortfall, a Rystad Energy report shows.
With cumulative historical investments made in Li-ion manufacturing having reached a relatively modest $128 billion by the end of 2020, this decade's spending to meet demand will mean the Li-ion battery manufactory industry will raise cumulative historical investments in the sector to about $690 billion by 2030, and to more than a trillion dollars in the years that follow.
The costs to build battery-manufacturing capacity have shrunk over time and the expected investment will drive total manufacturing capability in the 2030s to 6.9 TWh. Of that, 6.5 TWh include the current capacity and coming additions by planned investments, along with unspecified projects that global companies have proposed.
The remaining 0.4 TWh should be plugged in with other projects that are needed if global demand is to be met.
Plans for so called gigafactories — facilities able to produce an annual capacity of 1 gigawatt-hour (GWh) or more — are growing and are contributing to economies of scale that allow more cost-efficient fabrication of battery cells.
Our outlook for the decade includes around 3 TWh in announced projects thus far, with an additional 3.4 TWh expected to come into the mix by 2030 on the back of expansion plans put forward by Contemporary Amperex Technology Limited (CATL) and Tesla.
"Our research shows that $80 billion of battery sales are lined up for 2021, a 26% increase on 2020 levels. Given the surge in demand for batteries, we expect annual sales will reach $130 billion in 2025 and almost $160 billion in 2030.
"This growth rate is lower than that of global capacities, but due to the expected changes in battery chemistries and learning curve savings, battery costs are expected to drop this decade, increasing profit margins," said Matthew Wilks, senior analyst at Rystad Energy.
Most of the investments in 2020 were concentrated in Asia, following the historical production trend, with the region accounting for 85% of the $98 billion spent between 2015 and 2019.
Asia's market reach dropped to 76% in 2020 due to a growing number of European projects announced in the past couple of years, and the Asian share is set to decrease further as more European projects are given the green light. Europe is set to boost its share to over 40% by 2024.
A supply deficit is expected to occur from 2029, whereby the modeled investments required to meet demand cause an uptick in spending towards the end of the decade. This increase may potentially push annual investments past the $100 billion barrier in 2030.
Investments in battery factories announced so far for the period from 2015 through 2030 total $263 billion. CATL leads the market with 16% of the total expected spending for the period.
The pledged $43 billion includes a $2 billion investment in the Erfurt plant in Germany – representing the company's first foray into Europe — and $2.8 billion on expanding production in China at plants in Fujian, Jiangsu and Sichuan.
Rystad Energy estimates that an additional $71 billion will be required for the company to double its manufacturing capabilities from the 0.55 TWh per year anticipated in announcements to the 1.2 TWh targeted level by 2025.
Tesla, meanwhile, is set to account for 7% of total global spending through 2030 based on its announced gigafactories, amounting to $18 billion in investments for the period.
But with its aggressive proposed ramp-up to 3 TWh in production capacity by 2030 from current levels of around 50 GWh, we believe a further $230 billion in capital will be needed. This amount is approximately equal to the sum of all capital commitments announced thus far in May 2021.
Volkswagen, which has announced six European gigafactories, accounts for a 12% share of the total investments globally, although the first of its factories is only due to come online later this year. In addition, SVOLT, LG Chem, Farasis, and BYD have each committed to spending over $10 billion during this period. — Rystad Energy


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