Advanced Battery Technologies Play a Pivotal Role in the Electric Vehicle Ecosystem

Battery chemistry plays the most important role in determining the performance of electric vehicles (EVs). Lithium-ion batteries are currently used to power a majority of electric vehicles. Three major cathode chemistries used in lithium-ion batteries for powering EVs are nickel-manganese-cobalt oxide (NMC), nickel-cobalt-aluminum (NCA), and lithium iron phosphate (LFP). Each chemistry has its pros and cons and is chosen by different companies as per their requirements.

NMC lithium-ion is being adopted and developed by a vast majority of EV manufacturers owing to developments in high-nickel and low-cobalt NMC lithium-ion batteries. This improved battery chemistry offers high energy density while reducing the cost. The market for NCA and LFP batteries is volatile due to their dependence on specific EV manufacturers for adoption. However, NCM, NCA, and LFP would surely remain in the mix of battery chemistries that power the EVs of tomorrow. New technologies such as solid-state li-ion batteries are touted to bring about the next big revolution in the industry. However, the impact of such developments on the heavy investments that are being made in the manufacturing of existing batteries must be evaluated to mitigate the risks.

In addition, battery electric vehicles present a huge opportunity of eliminating the 5.6 giga tons of greenhouse gas emissions contributed directly by the automotive industry. Plug-in hybrid vehicles help in the initial adoption of electric vehicles, however, as the government criteria for giving subsidies becomes more stringent, the market for battery electric vehicles is expected to grow at a high rate.

While battery electric vehicles and plug-in hybrid electric vehicles occupied an equal share in the market in 2014, battery electric vehicles dominated both passenger and commercial vehicles segment in 2018. The increase in sales of companies such as Tesla and BYD which focus on battery electric vehicles has enabled the market to grow. Presently, around 90% of global commercial vehicles are manufactured in China. The government initiatives toward battery electric vehicles in China is aiding the market for battery electric commercial vehicles to grow faster than that of plug-in hybrid commercial electric vehicles.

It is evident that the battery is the core of the electric vehicles, thus it is imperative to develop battery technology that is both advanced and commercially viable. In order to act upon the requirement for optimized batteries and to boost the sales of EVs, governments are offering subsidies to the battery manufacturers to develop technologically advanced batteries with improved electric density.

However, the manufacturing, R&D and commercialization of advanced battery technology require high financial commitments, which can further expose companies and investors to different types of risks. [P1]

Some of the instances where these risks were identified include bankruptcy file by A123 Systems, a pioneer in the development of lithium-ion battery technology. Despite the fact that the company was able to secure an investment of over a billion dollars, bankruptcy was filed due to overdependence on a single customer.

In another incident, Envia, a battery start-up company focusing on launching an advanced technology battery also had to file bankruptcy. Even though the company was backed by General Motors, they were still not able to commercially launch their battery.

Similarly, companies such as Valence Technologies and Ener1 also had to shut down their operations due to excessive debts and lack of demand, respectively.

Thus, identification of risks at the right time is of great importance for the companies operating in the EV ecosystem. Gain insights on identifying the risks present in the ecosystem and incorporation of business strategies that can help overcome them along with the knowledge of the entire ecosystem. Register for the webinar on ‘Strategize Investments in EV Business: Transform Risks into Rewards’ on Tuesday, January 21, 2020 at 10:30 AM (PST), with keynote speakers Adalberto Maluf (BYD Brasil), Ryan Maughan (AVID Technologies), and Ajeya Saxena (BIS Research).