According to Lux Research, there is a burgeoning mismatch between the planned output of electric vehicle battery manufacturers and the automakers who create the cars for them to go into. This looming oversupply is coming because estimates of the market for EVs have far over-predicted the actual sales volumes being seen now.
Lux points to both Ener1 and Johnson Controls, both of which have made moves and publicly talked about the market oversaturation. Ener1 ended its contract with troubled carmaker Think – who has once again entered bankruptcy – and Johnson Controls has a deal with Saft that they are trying to end so that they can focus on pursue the power grid storage market instead.
As new market numbers begin showing the flagging sales of electric vehicles, EV battery makers appear to have been caught largely unawares as nearly every battery company in the business has been rapidly expanding their production capacity. At the same time, new startups are also entering the market, hoping to cash in on the green hype.
Lux predicts, however, that even if oil prices skyrocket to $ 200/barrel, the number of EVs required by the market would still be surpassed in battery supply by the world’s five leading vehicle batteyr manufacturers right now (these include LG Chem, GS Yuasa, SB LiMotive, AESC, and Sanyo). That means that dozens of other battery makers would be fighting for a piece of the oversupplied market.
There would be attrition.
Lux predicts that overall, only a few winners would emerge from the market onslaught, and would likely include those companies who are closely aligned with (via partnerships and/or ownership shares) with auto manufacturers who are successful in the electric market. This leaves some strong contenders with a steep climb, though – such as A123 Systems and Ener1, neither of which have very close ties to any fast-growing EV makers. Others, such as China BAK, China Aviation Lithium Battery, and BYD are all closely intertwined and already well-established in other battery markets.
The good news is that an oversupply will always mean plummeting prices. Analysts have long predicted that the “tipping point” for affordable electrics is at about $ 350 per kilowatt hour. At that level, an EV is roughly equivalent in price to a like-sized gasoline car. Although Nissan hasn’t stated their profits, the Leaf sells with its battery at roughly $ 375/kWh.
So the future of electrics may be (in some ways) better than has been predicted.