Battery Revolution: Sustainability, Technology and Geopolitics in Electromobility

International consulting firm Roland Berger provides expert analysis and strategic advice across a range of industries, including automotive and energy. In cooperation with the PEM Institute at the prestigious RWTH Aachen Technical University , SEVA has prepared the Battery Monitor 2023 report. The study provides detailed and updated information on the status and development of the battery market, from which SEVA has prepared a short summary.

The transition to green energy and sustainable transport represents a significant intervention in existing technologies and value chains. Central to these changes is the battery, and as a result the battery market has experienced major changes in recent years. Around the world, various players are trying to gain a foothold in this fast-growing market. Policymakers face the challenge of shaping electrification targets to meet environmental goals while strengthening local economies and securing their countries’ geopolitical position in global markets. Original equipment manufacturers (OEMs) are ramping up production capacity and securing raw material supplies to meet electrification targets while striving to maintain global competitiveness.

Value chains and life cycles are intertwined around the world, creating cross-border dependencies. The trend is therefore towards more resilient supply chains. For example, the Inflation Reduction Act (IRA), signed into law by the US President in 2022, has significantly changed the global economic and political environment just for batteries. It offers huge subsidies to battery manufacturers on the condition that they move much of their added value to North America and decouple their value streams from countries considered political adversaries on the international stage.

At the same time, regulatory requirements are increasingly complex and their impact on battery value chain participants is growing. The IRA significantly increases the attractiveness of the US for investors, while the European Union legislation focuses more on the transition towards sustainability.

The battery market, particularly in Europe and China, is overheating and it is becoming increasingly difficult for new entrants to establish themselves. Investments and further expansions should therefore be based primarily on secured sales volumes. The announced overcapacity in China could lead to attempts to significantly increase exports to the European market, which would put significantly more competitive pressure on European newcomers to compete with Chinese imports.

In terms of technology, Western and Korean-Japanese companies seem to be focusing on technological leadership and innovative cell technologies, for example with even higher nickel content or high silicon technology. On the other hand, Chinese players seem to focus on cost-effective solutions such as LFP, sodium-ion batteries and cell-to-pack designs.

To say today with any degree of probability who will eventually win this battle is still very difficult. What is certain, however, is that if Western players want to be in the winner’s group, they need to set a solid strategy, undertake significant innovation efforts and secure capital for this transformation as soon as possible.

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