Lithium-ion batteries â€“ The bubble bursts - Roland Berger

Lithium-ion batteries – 

The bubble bursts 

Stuttgart, October 2012 

Li-Ion-Batteries_Bubble_final_E.pptx 

1

SUMMARY 

Consolidation in the lithium-ion battery (LiB) market is inevitable – 

Stakeholders need to revise their strategies 

A 

B 

C 

Source: Roland Berger 

The large-format lithium-ion cell market will face overcapacity and price wars: 

- Demand is lower than expected 

- A lot of capacity has been built up – but new equipment to be installed will be 

more efficient 

- Prices are down to 180 and 200 EUR/kWH in 2014/2015 

Bottom-up calculations show that with an expected EBIT margin at or below 5%, 

"early movers" in particular cannot generate enough EBIT to finance their cost 

of capital 

New developments on the material side (mainly cathodes, electrolytes/separators) 

as well as in production technologies will lead to further cost reductions – but 

require more cash for introduction and industrialization 

Therefore only the already large players or companies will survive the shakeout, 

as their parent companies might be willing to provide the business with sufficient 

capital 

That's why cell manufacturers as well as their customers – the OEMs – need to 

rethink their strategies 


2

A 

OEMs will increase xEVs sales significantly in the short term – 

Toyota will remain the main player 

Hybrid light HEV 1) BEV 

0.3 

2011 

1) FHEV, PHEV 

DEMAND 

OEMs xEV sales plans by xEV type [m units] 


25% 

0.8 

0.3 

80% 

17% 1.3 

2015 

1.1 

0.7 

2011 

38% 

2.6 

1.3 

2015 

OEMs excl. Toyota Toyota xx CAGR 2011-2015 

0.1 

2011 

0.6 

2015 

Comments 

• Figures are a 

summary of OEMs' 

sales targets for their 

xEV programs 

• They do not include 

sub-A-segment 

vehicles (vehicles not 

classified as 

"passenger cars") 

• Sales targets tend to 

be on the optimistic 

side – but were not 

adjusted by Roland 

Berger 


3

A DEMAND 

However, in one 2020 scenario, xEVs will represent only a minor 

share of powertrains in EU, US and China – Introduction delayed 

Base scenario: xEV market share in the EU, US and China, 2020 [%] 

70% 

26% 

1% 2% 

0% 

Conventional incl. Start-Stop 

Hybrid Light 


95% 

0% 2% 

2% 0% 

FHEV 

PHEV 

BEV/RE 

1% 

97% 

1% 1% 

COMMENTS 

• Market share calculated based on an 

assessment of push (legislation-driven) and 

pull (customer-driven) factors for xEVs in the 

EU, US and China 

• The market shares shown represent the 

minimum required xEV share to meet push 

and pull in each region – Higher xEV market 

shares are possible and even likely 

• The EU's xEV market share achieves the level 

required to meet EU CO 2 emissions targets in 

an aggressive scenario regarding ICE 

optimization and driving resistance reduction 

• The US's and China's xEV market shares are 

primarily required to fulfill pull factors for xEVs 

• Further legislative action might increase share 

• Japanese/Korean figures expected to fall 

between the US and EU 


4

PUSH 

PULL 

A DEMAND 

The EU's xEV market is primarily legislation-driven – The US and 

China are driven primarily by customer pull 

Summary of push and pull factors for xEVs 

1 EU 

2 USA 

• Even under optimistic assumptions 

regarding ICE improvements and light- 

weight measures, all OEMs will need 

xEVs to comply with 2020 CO 2 

emissions targets 

• In terms of costs, hybrid light and 

PHEVs are most favorable 

• No TCO advantage for FHEV, PHEV or 

BEV powertrains 

• Hybrid lights will become neutral as 

regards TCO, but will provide additional 

functions 

• In larger-car segments, customers will 

be willing to pay more for higher 

performing hybrids 

• Only niche demand for BEVs 

Source: Interviews; Roland Berger 

• CAFE emissions targets can be met by 

utilizing ICE improvements and some 

weight reduction technology – OEMs 

also have no cost incentive to apply xEV 

technologies on a large scale 

• However, the ZEV mandate and the 

ability to earn credits will lead OEMs to 

build at least some PHEVs and EVs 

• No TCO advantage for xEV powertrains 

due to low fuel costs 

• However, some customers are willing to 

pay for xEVs for environmental image 

reasons 

3 

China 

• Technology penetration is driven only by 

government targets for PHEVs and EVs 

• Fuel consumption targets can be met by 

optimizing ICE in all segments 

• Fleet emissions are possible, but there 

is no clear indication yet 

• If fleet emissions will be set, high xEV 

penetration expected 

• Almost no customer pull for xEVs – 

except in luxury segment 

• Light and full hybrids would offer 

significant consumption advantages, but 

TCO advantage is limited due to low 

cost of fuel 

• No willingness to pay for "green" image 

– in luxury segment, innovativeness of 

xEVs is an important purchase criteria 


5 

5

A DEMAND 

To meet CO 2 emission targets, OEMs will mostly introduce xEV only 

according to the cost of CO 2 emission reductions in their fleet 

Assumption for xEV usage at OEMs to comply with EU CO 2 emission regulation 

Gap between CO 2 fleet 

emissions and CO 2 targets Usage of xEVs types to close the gap at OEMs 1) 

108 

101 

OEM 

2020 CO 2 

emission 

2020 CO 2 

emission 

target 

0 

1 

2 

3 

OEM will offer xEVs in segments to fulfill customer 

requirement and skim willingness to pay – Hybrid light 

in large/luxury cars and minor share in medium size 

cars, PHEVs in large/luxury cars, BEVs in mini/small 

cars 

Intensify usage of hybrid light in medium size and 

small cars and PHEV usage in larger cars 

Expand PHEV usage to medium size cars 

Increase EV penetration in smaller cars and 

expand usage to medium size cars 

Cost of cutting CO 2 

emissions 2) 

1) Based on interviews, validation with TCO calculations 

2) Assessment is based on a calculation of xEV CO 2 emission reduction potential, customer willingness to pay and cost (components and other cost) 


0 


High 

6

A DEMAND 

Hybrid light will become at least TCO neutral – Buyers of large/ 

luxury vehicles will be willing to pay for full hybrids and PHEVs 

Pull factors for xEVs Europe, 2020 

Vehicle 

size 

Luxury 

Large 

Medium 

Small 

Mini 

Light Full PHEV EV 

xEV type 

TCO neutral/advantage to best ICE-technology Willingness to pay Other reason 


CO 2 emissions limits 

in company car fleets 

Esp. sport cars 

COMMENTS 

• Assessment of TCO is 

based on a detailed 

calculation – taking into 

account necessary uplift 

of 200% on material 

cost for OEMs to 

maintain EBIT margin 

per vehicle 

• Willingness to pay in 

large and luxury segment 

is driven by social 

pressure to be environmental 

compliant and 

additional functions 

enabled by xEV powertrains 

(e.g. comfort startstop, 

idle AC) 


7

A DEMAND 

A significant share of powertrain electrification are stop-start and 

micro-hybrid systems – but here, LiB are not competitive 

• Conventional starter batteries cannot be used effectively in start-stop and 

micro-hybrid applications due to poor cycle life and poor charge acceptance 

• Initially, most of the start-stop systems used a 2 battery approach in order to fulfill 

the requirements: 1 conventional starter battery (for starting only) plus 1 AGM 

battery for power supply. Problems are cost for 2 batteries and limited life of the 

AGM battery – Lithium Ion cell makers did expect a chance here 

• Recent developments in Lead-acid batteries (called Enhanced Flooded Battery ) 

have now be presented and are likely to become a viable and cost effective 

solution for start-stop and micro-hybrid applications 

• Companies like JCI, Exide, Banner, Moll, Shin Kobe, GS-Yuasa and others will 

probably be able to offer Lead-based products that will meet start-stop and 

micro-hybrid requirements exceeding 200,000 km or 6 to 8 years of operation 

at lower system costs than lithium-ion batteries. 

Source: Source: Roland Roland Berger Berger 


8

B CELL ECONOMICS & TARGET PRICES 

Price levels around 200 EUR/kwH (approx USD 250) in 2015 do not 

provide sufficient EBIT to finance cost of capital 

Typical 96 Wh PHEV cell – Cell cost structure 2015 

Cell P&L breakdown, 2015 Cell material cost split, 2015 

Total cost: approximately USD 22.1/cell (~ 237 USD/kWh) 

Overheads 

SG&A 

10% 

Labour 

6% 

1% 

Energy/Utilities 0% 

18% 

D&A Equipment 

0% 

2% 

D&A Building 

Quality / Evironmental 

EBIT 

5% 

1) Including carbon black content, foil and binder cost 

Source: Roland Berger LiB Value Chain Cost model 2011 

58% 

Raw material 

~24% 

of total cell 

costs) 

USD 13.4/cell 

39% 

18% 

13% 

19% 

11% 

Material cost 

breakdown 

Cathode 

Anode 

Electrolyte 

Separator 

Housing and feed-througs 


9


Our calculation takes into account declining material prices– 

Driven by strong competition to capture market shares 

Impact on the cell manufacturing material prices (mid-term - 2015) 

Input 

materials 

CATHODE 

ANODE 

SEPARATOR 

ELECTROLYTE 

IMPACT FACTORS ON PRICES 

Raw material 

cost 

Process 

cost 1) 

Increasing the price Limited impact Decreasing the price 

1) Investment, energy, labor 2) Process cost reduction potential for LFP available 

Source: Roland Berger "Battery material cost study V.2.4 / Q1 2011" 

2) 

Standardization Competition/ 

capacities 

Overall strong price decrease 

Overall 

impact 

Price 

per kg 

2015 

• NMC 25 $ 

• LMO 15 $ 

• NCA 35 $ 

• 18 $ 

(50-50 mix) 

• Solution: 

20 $ 

(LiPF6:25-30$) 


10


Material manufacturer need to improve their materials to drive 

down costs – resulting in additional R&D demand on cell level 

Manufacturing cost calculation 2015 [USD/kg] 

TMC 1) 

[USD/ 

kWh] 

~32.5 ~25.5 ~24.5 ~23.7 ~22.8 ~17.5 ~12.8 ~20.2 ~19 

10% 

10% 

73% 

LCO 

4% 

12% 

12% 

66% 

NCA 

4% 

13% 

13% 

2% 

64% 

NCM 

111 

13% 

13% 

63% 

NCM 

523 

4% 

14% 

14% 

2% 

62% 

NCM 

424 

49% 

LMO 

16% 

15% 

57% 

HCMA 3) 

17% 

16% 

54% 

HV 

spinel 4) 

~56.49 ~34.49 ~37.8 ~36.54 ~35.27 ~34.12 ~27.3 ~20.4 ~27.46 

7% 

7% 

21% 

22% 

2% 

40% 

LFP - 

FePO4 

8% 

5% 

15% 

20% 

3% 

5% 

2% 

5% 

5% 

2% 

Comment 

Quality/Environment Maintenance D&A Other D&A Equipment Energy/Utilities Labor 

1) Total manufacturing costs 2) High quality differences 3) not available until >2015 4) not available until 2020 


2) 

• According to latest analyst 

reports the prices of Nickel, 

Cobalt and Manganese will 

decline through 2015 

• Largely as a result thereof CAM 

material costs will decrease by 

between 7% and 22% between 

2011 and 2015 

• The costs of LFP will increase 

largely as a function of higher 

energy and utility costs which 

account for 30% of total cost 

• If high-capacity materials 

(HCMA) is ready by 2015, this 

will offer a significant cost 

advantage over other CAMs due 

to higher energy density 

compounded by lower material 

cost 

Raw materials 


11


Declining cell prices will result in massive pressure on cell and CAM 

manufacturer margins - not enough to finance costs of capital 

Typical 96 Wh PHEV cell – Cell price breakdown 2015 [US $ / cell] 

Other 

materials 1) 

8.2 

Other 

CAM cost 

CAM 

margin 

Cell cost 

4.6 

Cathode 

material 

cost 

0.4 

CAM 

SG&A 

Margin pressure 

0.3 

CAM 

margin 

13.4 

Cell 

material 

cost 

4.3 

Cell 

D&A 

2.1 

Labor/ 

utilities 

2.3 

Cell 

SG&A 

22.1 

Cell 

cost 

Cell 

margin 

1.2 

Cell 

margin 

Cell 

price 

23.3 

Cell 

Price 

1.3 

Market 

price 

• Any price decrease beyond 24 USD / cell (lower than EUR 200 / kWh) will 

have direct impact on CAM and cell manufacturer margins 

1) Anode, separator, electrolyte, housing 2) Expected market price based on expert interviews 


7.5% 6.0 % 

Delta 

Market 

price 2) 

22.0 

Market 

price 

Comment 

• For a typical CAM 

manufacturer 

– Raw materials account for 

up to 55% of total cost 

– D&A and utilities account 

for up to 25% of total cost 

• For a typical cell 

manufacturer 

– Raw materials account for 

up to 58% of total cost 

– D&A and utilities account 

for up to 19% of total cost 

• In view of their limited ability 

to offset sales price declines, 

CAM and cell manufacturers 

will compete over a shrinking 

profit pool 


12


To significantly reduce cell costs beyond 2015, major innovations 

in CAM technology and introduction of new CAMs are necessary 

Typical 96 Wh PHEV cell – Impact of material improvements on cell prices 

(cost for Auto. customers) 

NCM cell 

2015 

(230 

USD/kWh 

22.1 

5.2 

16.9 

NMC 

cell cost 

2015 

CAM cost share 

0.4 

Manu- 

facturing 

Innovation pressure 

Cost reduction NCM cell 2015 – 2020 

-6% 

1.0 

Energy 

density 1) 

0.1 

Labor 

NCM cell 

2020 

20.8 

4.3 

16.5 

NMC 

cell cost 

2020 

Potential cost 

reduction HCMA 

-10% 

0.9 

HCMA 

19.9 

3.4 

16.5 

HCMA 

cell cost 

2020 

• Unless HCMA material is introduced, further price reduction potential of CAM materials is 

limited and margins remain at unacceptable level 

• Also cell manufacturer need (and will) improve processes and yield rate 

1) Based on a high-density 50-50 mixture of NCM 111 and LiNiO 2 

Source: Industry reports, experts interview, Roland Berger analysis 

HCMA cell 

2020 

204 

USD/kWh 

Comment 

• Const. cell energy (at 96 Wh) 

assumed 

• In 2016 introduction of higher 

density NCM CAM, resulting 

in:specific cell energy increase 

to141 Wh/kg and concurrent 

reduction in NCM usage to 113 g 

• In 2018 introduction of high-density 

HCMA CAM: further increases 

specific cell energy to 144 Wh/kg 

with HCMA usage to 100 g 

• HCMA price includes a license fee 

of 2% 

• No changes in anode, separator 

and electrolyte cost assumed in 

figure: 

add. potential 10..20$ /kWh 

• Add. cell manufacturing process 

improvement: potential ca. 10..15$ 

/ kWh 

• Cell price forecast 2018..2020: 

200$ / kWh (incl. approx. 15% 

margin for both CAM and cell 

manuf.) 


13 

13

C IMPLICATIONS 

The value chain is therefore expected to further consolidate (1/2) 

Raw materials 

Lithium 

mining 

Anodes, 

Cathodes, 

Separators, 

Electrolytes 

and 

Precursors 


TODAY (2012) 

> Oligopoly 

> Dominated by Asian 

(Jap.) players 

> Partially specialized 

precursors sourced 

> Some cathode 

materials 

manufactured by 

cell manufacturer 

CHANGES BY 2020 

> Some selected new players 

> New recycling companies 

> Business models integrating recycling 

> New players (from specialty chemical 

sector ) especially for Automotive and 

ESS 

> More integration of precursor 

manufacturer 

> Cathode manufacturing by cell 

manufacturer only for top 2..3 with 

large chemical business 


14

C IMPLICATIONS 

The value chain is expected to further consolidate (2/2) 

Battery cells / 

stacks 

("LiB manuf.") 

Battery 

assembly 


TODAY (2012) 

> Some JVs 

disintegrating 

> Established players 

gaining share, 

research spin-offs 

with public & IPO 

funding leaving the 

market 

CHANGES BY 2020 

> Massive consolidation (cost 

pressure, innovation) 

> Auto-Cell manuf. JV's as exemption 

> Mainly by OEMs (JVs > Increased outsourcing, but still 

LiB) inhouse dominated by in-house assembly 

> Selected supplier – > Some cell manufacturers try to deliver 

LiB JVs 

larger part of system (incl. electronics) 

> Limited LiB alone as Tier-1 


15


16

Lithium-ion batteries â€“ The bubble bursts - Roland Berger

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