From the mobile devices we use to the vehicles we drive, the world is becoming ever more reliant on battery power. And demand is growing at an electrifying speed.
Batteries are key to achieving net-zero carbon targets for governments and companies everywhere. So much so that demand is off the scale, leading Bloomberg to declare in December 2020 that this is the age of the battery.
Their research revealed that demand for storage capacity was just 0.5 gigawatt-hours (GWh) in 2010. By 2020, that had grown to 526 GWh and is expected to rocket up to 9300 GWh in 2030. Much of that growth will be down to demand for electric vehicles, industrial storage and battery-powered consumer devices.
That spells exciting, even mind-boggling growth opportunities for those businesses already manufacturing battery cells and related electrification products. But, to meet the massive growth in demand, root and branch change is needed to the production lines those businesses use to manufacture their cells.
Many battery cell manufacturers are still niche, serving local markets, quite happily and profitably, of course. But now there’s a bigger pond to dive into. A global market that’s growing, baying for and buying up battery cells and production capacity like never before. The opportunities for manufacturers are unprecedented. But only those who can scale at speed will truly benefit from the meteoric rise in demand and become the biggest fish in a global pond.
As mentioned earlier, electric vehicle (EV) manufacturing is a key driver of growth in demand. McKinsey reports that the vast majority of the world’s EV battery production capability is centred in Asia—specifically China, South Korea and Japan. Only about one per cent of manufacturing happens in Europe. That represents a massive opportunity for expansion.
Although demand for lithium-ion batteries is increasing all over the world, prices are falling thanks to technology advances and progress. This situation is leaving manufacturers with a dual challenge: expand production capacity to meet demand while reducing production costs to stay competitive within the market.
This race to capacity is impacting further in the supply chain. While order books are filling up faster than battery cells can roll off production lines, equipment manufacturers (OEMs) are struggling to keep up designing, producing and commissioning the cell manufacturing lines, aka the “machines that make the machine”. How can these small OEMs, still acting locally five years ago, now deliver multi-programs on several continents?
Some OEMs might be tempted to stick with their current business model to see if it can hold up in the face of rising demand. That will likely entail leaning more heavily on their existing team of in-house engineers to fly around the world installing and commissioning production facilities at various sites. But the headcount of these teams and the speed they work will need to increase significantly to meet the level of demand that’s already there, never mind the projected future growth.
To truly capitalise on expansion opportunities, battery cell manufacturers and others in the electrification arena are going to need a much bigger, more experienced support network to help them optimise their installation and commissioning phase. And moving into new territories (such as the European or American markets) will expose these businesses to a whole host of compliance issues that in-house teams may be unfamiliar with, such as strict visas, work permits and health and safety regulations, all of which must be adhered to.
With such large scale, varying requirements, OEMs planning to expand will struggle to keep up with the concurrent programs and risk failing at the last step of their project: Delivery to the customer.
With so much at stake, the equipment manufacturer’s Industry will need to transform its delivery model to capitalise on the sector’s exponential growth. Getting this right will push them to become global powerhouses. Sticking to traditional, in-house delivery and commissioning will likely restrict them to remain local niche players.
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