Demand for electric vehicles (EVs) is set to skyrocket as governments around the world aim to achieve net-zero emissions by 2050. This means that by 2035, all new cars sold must be electric, requiring over 70 million batteries annually for consumer EVs alone, according to the International Energy Agency. To meet this demand, gigafactories producing new battery capacity will need to increase from the current annual global manufacturing capacity of approximately 500 gigawatt hours to 3,000 gigawatt hours by 2025.
This demand for batteries has opened up a world of opportunity for governments, corporations, original equipment manufacturers (OEMs), car manufacturers, and investors to invest in battery manufacturing capacity. However, developing and optimizing these facilities is not without its challenges. These bespoke manufacturing facilities require large-scale construction, significant energy consumption, and intricate supply chain management.
Presently, China produces about 80% of all lithium-ion battery cells. To keep up with China, the United Kingdom (UK), European Union (EU), and United States (US) are all in a global battery arms race to acquire market share quickly. Economic, political, and environmental factors are the main drivers of this race. The countries that attract battery manufacturers will be in a better position to maintain and grow their car-manufacturing industry, ensure domestic energy security, and offer a localized and cost-effective alternative to internal combustion engines (ICEs).
The development of gigafactories requires a comprehensive approach to construction and optimization, power supply, site selection, feedstock sourcing, sales strategy, offtake agreements, EV-ready supply, technological adaptation, and regulatory compliance. As the battery sector undergoes massive regulatory change, managing the wider supply chain will be one of the critical factors in the development of successful gigafactories.
Despite the challenges, the development of gigafactories is a critical piece of the energy transition puzzle. These factories are essential to move away from ICEs towards a more sustainable future. By capturing the environmental, social, and commercial benefits associated with the battery industry, the gigafactory market offers a promising opportunity for those willing to navigate the challenges and capitalize on the potential of this growing industry.
Source: Building a battery supply chain across Europe & America | Akin Gump
