Market Analysis Update Q2 2023

This report provides a market update on the surge in demand for lithium-ion batteries due to the increasing popularity of electric vehicles (EVs). It highlights the significant growth in sales of traction batteries and the establishment of new cell production plants and battery component factories in Europe to meet the rising demand.
According to the Global EV Outlook 2023 published by the International Energy Agency (IEA), the sales of electric vehicles continue to soar globally. This upward trend has continued in 2023, with global EV sales projected to reach 14 million units by the end of the year.

Surge in demand for batteries

Rising EV sales translate into a surge in demand for batteries. In 2022, the sales of batteries used in EVs reached a staggering 690 GWh in combined energy capacity, marking a substantial 76% growth compared to 2021. Leading the battery cell production market are companies such as CATL, LG Energy Solution, BYD, Panasonic, Samsung SDI, and SK On, most of which have production facilities in Europe.

Alongside the boom in electromobility, the market for stationary battery storage systems has also been growing rapidly. In 2022, 122 GWh of battery capacity for stationary storage systems were sold globally, representing a remarkable 177% growth. This demand is expected to persist, particularly in China, where government policies mandate simultaneous installation of energy storage systems with renewable energy generation.

Battery Production in Europe

To meet the growing demand for batteries, European countries have been establishing battery cell production plants and component factories. Notably, Northvolt started cell production in Sweden, while CATL initiated serial production near Erfurt, Germany, in December 2022. ACC also began battery cell production in France, aiming to complete the ramp-up by the end of 2024.

Market Analysis Update Q2 2023 | VDI/VDE Innovation + Technik

Additionally, South Korean companies LG Energy Solution, Samsung SDI, and SK On are producing battery cells in Poland and Hungary. LG Energy Solution’s production capacity in Poland is expected to expand to 90 GWh/a in 2023, and SK On plans to open another facility in 2024 with an additional 30 GWh/a capacity. Samsung SDI’s plant in Hungary is supposed to have a capacity of 40 GWh/a following expansion.

As of 2022, the total production capacities for EV batteries in Europe amounted to approximately 145 GWh/a, expected to increase to 175 GWh/a by the end of 2023.

Component Production in Europe

In addition to cell production, European factories are supplying necessary battery components such as cathode active material (CAM), separators, and electrolytes. Companies like BASF and Umicore produce CAM in Europe, while LG Chem and Toray manufacture separators in Poland and Hungary through a joint venture. Several other companies are involved in electrolyte production, mainly in Poland, Hungary, and the Czech Republic.

Market Analysis Update Q2 2023 | VDI/VDE Innovation + Technik

Challenges in Battery Production

The process of building a battery cell production plant typically takes around five years from the initial announcement to the start of operations. The planning phase involves setting specific goals, identifying potential locations, securing financial coverage, and navigating approval processes.

During development, a pilot line is often constructed to precede serial production, allowing for the testing of cell production processes and designs. This pilot line serves as a foundation for optimizing serial production.

Market Analysis Update Q2 2023 | VDI/VDE Innovation + Technik

The choice of location is critical, considering rising energy prices in Europe and the emphasis on renewable energy sources to reduce the carbon footprint. Additionally, securing skilled labor in the vicinity of the factory is essential.

Europe is gaining momentum

Battery cell production in Europe is gaining momentum, with several new facilities starting production. Challenges in building new production sites are being met with dynamic adaptability and sustainability-focused solutions. With more factories starting operations in the coming years, Europe aims to meet the rising demand for batteries through domestic production, making significant contributions to the global battery market.

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