S&P, Energy News, ET EnergyWorld
While their opportunities for growth are significant, they will have to navigate rapidly changing technology, heavy spending, geopolitical forces shaping trade lines and environmental constraints, he said.
Demand for batteries that power light electric vehicles (including battery-electric vehicles and plug-in hybrids) could increase eightfold by 2025, up from 139 gigawatt hours in 2020.
Many countries are promoting the production of batteries to promote their own domestic electric vehicle industry.
“The battery industry has entered an extremely dynamic phase. Companies face substantial growth opportunities as electric vehicles rapidly replace traditional cars,” said Stephen Chan, credit analyst at S&P Global Ratings.
“It will require a significant initial investment in a battery standard that can be quickly eclipsed by superior technology. There are many moving parts that can contribute to large changes in odds, up or down. “
Although Europe and the United States are aggressively expanding battery capacity, supply is likely to be lower than demand. Regulatory incentives and government subsidies have made Europe the fastest growing electric vehicle market in 2020.
In the United States, the Biden administration has proposed tax incentives and new infrastructure (such as charging stations) that could raise the ratio of electric vehicles to new car sales to around 10%, by 2025.
“Battery supply chains in the United States and Europe are underdeveloped and will need years to catch up with players like China,” Chan said.
Global automakers are also leveraging their partnerships with Korean and Japanese battery suppliers who have more capacity available in Europe and the United States to secure battery supply in their home countries.
S&P predicts that the cost of lithium batteries could drop to $ 100 per kilowatt hour as early as 2024. Industry players often say this level is an inflection point for mass adoption of electric vehicles.
It will make electric vehicles about as cheap as equivalent combustion engine vehicles. As demand increases, economies of scale come into play.
S&P predicts that a virtuous cycle of higher sales, lower costs and increased efficiency will boost automakers and their suppliers.
Drum players continue to experiment with materials and types of drums. S&P said the competitive order in this industry will be dynamic over the next five to ten years as entities refine technology and converge to a standard.
As the electric vehicle market continues to grow, entities will need to manage substantial environmental, social and governance risks.
“This will soon become a critical environmental issue, given the toxicity of the materials and the soon-to-massive scale of the industry. Large companies and battery suppliers will face increasing pressure to take on this environmental responsibility,” he said. S&P Global Ratings credit analyst said. Minjib Kim.