$300 billion in new lithium ion battery gigafactories
According to Benchmark, worldwide manufacturing of lithium ion batteries will more than fivefold by the end of the decade as a result of these expenditures. Last year, the world added 102 gigafactories to the ten-year pipeline, with a total capacity of 3.1 terawatt-hours.
Due to the extent of its investment in new capacity, China is expected to remain the leading producer by the end of the decade. According to benchmark estimates, China will produce 69% of the world’s lithium ion batteries by 2030.
According to Benchmark, the world’s largest battery maker, CATL, announced $12.6 billion in new battery capacity additions last year. By 2031, it expects to have a battery production capacity of 1042.6 GWh per year.
With $20.8 billion pledged over the course of the year, battery investment increased in the US last year as a result of the Inflation Reduction Act’s approval in August.
So, in terms of the rate of new investments, North America is catching up. By comparison, North America’s pipeline capacity expanded by 49.0% to 1046.6 GWh in 2022, while China’s pipeline capacity increased by 65% year over year to 5462 GWh.
The pipeline capacity in Europe rose from 855.2 to 1,193.2 GWh, a 39.5% increase.
Still, given the greater inflation and interest rates in the US compared to China, more money will be needed to purchase the same amount of increased battery capacity.
An average North American gigafactory costs over $100 million to construct, which is 46% more expensive per gigawatt-hour than Chinese gigafactories.
For instance, a GWh of output at LG Energy Solution’s proposed $1.3 billion project in Arizona would cost around $127 million. In the summer, LG declared that it was reconsidering the facility because building costs were increasing.
China’s average cost per GWh of new battery manufacturing capacity is roughly $72 million, however some plants are around $55 million per GWh.
Yet, the cost of increasing current capacity is far lower, particularly on current car manufacturing facilities. To increase the capacity of its Spring Hill factory from 35 GWh to 50 GWh, Ultium Cells, a joint venture between LG Energy Solution and General Motors, stated it would only invest $275 million.
Additionally, the US government is assisting in financing the development of battery facilities. Ultium Cells, a joint venture between GM and LG Energy Solution, received a $2.5 billion loan from the Department of Energy last month to build three battery facilities.
A government loan application has also been submitted by BlueOval SK, a joint venture between SK On and Ford.
Global investments in battery capacity are now dominated by Tier One battery providers, demonstrating their capabilities to secure the required funding.
As Tier One suppliers, Benchmark includes CATL, Envision AESC, LG Energy Solution, Panasonic, Samsung SDI, SK On, BYD, Northvolt, and Sunwoda.
A number of Tier 1 producers announced large investments in China during the fourth quarter of 2022. While CATL announced it will invest RMB 14 billion ($1.9 billion) in a plant in Henan with an anticipated nameplate capacity of 26 GWh, Sunwoda said it would invest RMB 33.3 billion RMB ($4.7 billion) in two cell sites in Hefei and Zhejiang.
Despite the size of the investments made by Tier 1 suppliers, the demand for Tier 1 cells will outpace supply over the next years, with a developing cell shortage anticipated starting in 2028 as demand for EVs and energy storage is anticipated to increase as nations get closer to net zero objectives.
Source: Benchmark Mineral Intelligence
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