The output of the automotive market is currently responsible for nearly 25% of all global energy-related CO2 emissions. In order to achieve the goals of the Paris agreement and meet decarbonisation targets, the industry needs to transition to manufacturing zero emission vehicles. This report focuses on how public and private capital can and should be unlocked for the benefit of the UK battery sector.
For investors in today’s automotive sector the shift to zero emission vehicles poses not only a transition risk, but also a significant new market opportunity. If experts agree on one thing it is that the battery is the answer to cleaner transport. For instance, The International Energy Agency (IEA) describes lithium-ion batteries as “the key technology for electrifying transport”.
While for other sectors, such as buildings and energy, multiple pathways to decarbonisation are still available, the progress of road transport is no longer delayed by technological debates. The main need to scale-up is greater flows of finance. To meet demand for EV manufacturing, the battery market will need to grow rapidly. In 2030, the estimated market value ranges from $116 billion to $278 billion, while the global market value in 2021 was around $46bn.
The move to battery powered EVs presents a huge opportunity in attracting the attention of governments, companies and investors. While this report focuses on battery manufacturing for EVs, the need for batteries extends beyond road transport to industries like shipping, aviation and energy grid infrastructure.
Seeing future economies will depend on batteries, the competition for a share of the market is fierce, and often described as a ‘battery arms race’. Currently, China holds 85% of the market and is expected to remain the market leader. However, the sheer scale of demand means other countries, including the UK, will have the opportunity to secure a piece of the market.
The UK Government strives to secure a domestic battery manufacturing sector, localising it around wider EV manufacturing. If the UK would fail to do so, it poses the double risk of losing the economic benefits of battery production and the existing automotive industry in the UK diminishing through car manufacturers re-locating to battery production overseas.
All in all, EV battery supply chains represent a significant investment opportunity. An analysis by the Advanced Propulsion Centre (APC) suggests there are niches of the supply chain where the UK is able to compete and capture some of the global value in batteries, power electronics, and electric machines, rather than relying on imports.
The opportunity for the UK to enter the supply chain of batteries has a projected value of £24 billion annually. The UK battery sector is already showing some strengths, such as highly capable automotive manufacturing productivity, a competitive chemicals industry, as well as leading academic research and development of new low carbon automotive propulsion technologies. However, if the industry aims to scale up, it needs more financial support.
All over the world the battery supply chain for the EV market is racing to scale up. This development brings along new opportunities for investment in the UK. However, this can only happen if some barriers are removed.
The Green Finance Institute’s Coalition for the Decarbonisation of Road Transport (CDRT) has identified a portfolio of seven demonstrator solutions for scaling up the UK battery supply chain. These solutions will de-risk investment and unlock the capital required. To achieve this, cross-sector collaboration is of critical importance and a requirement for securing the future of the UK’s automotive industry.
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