More Batteries than the World Needs

BloombergNEF caution that the surge of battery plants under development worldwide will be able to generate far more cells than the world's economy requires.

As utilities install large batteries to maintain the electricity grid and automakers electrify their fleets, demand for lithium-ion cells is rising fast. But manufacturers have announced so many new plants that, according to BNEF, demand will be exceeded by capacity throughout the rest of the decade.

BNEF projects in its newest Electric Vehicle Outlook that by the end of 2025 the global battery sector will be able to generate more than five times as many cells as the world would need that year.

The research concluded, "This is good news for automakers and EV buyers but marks a challenging time ahead for new entrants to the battery industry,"

China is particularly affected by oversupply; for the remainder of the decade, production capacity will at least 400% surpass yearly battery demand. It's also a problem in the US, where President Joe Biden has given establishing a local battery supply chain top importance for industry and climate. Among initiatives to attract battery manufacturers, last year the government provided Ford Motor Co. a conditional $9.2 billion loan to build three battery facilities.

Europe too has an abundance of battery capacity, but governments are pushing for more. Although Nortvolt AB, a Swedish battery manufacturer, has a facility under development in Germany, the nation's Economy Minister Robert Habeck is already pushing the business to establish yet another.

According to Yayoi Sekine, head of energy storage research at BNEF, certain proposed plants throughout the globe may be postponed or canceled because of industrial overcapacity. Ford, for instance, has scaled back its ambitions for increasing the manufacturing of electric vehicles blaming a pricing battle for trucks and batteries.

"This will be a problem everywhere, including the US," she emailed.

Along with this is a change in the chemistries applied in battery manufacture. Especially among Chinese manufacturers, the survey revealed that lithium iron phosphate batteries are becoming more and more common for running electric automobiles. Their component components are less expensive than conventional lithium-ion cells made of nickel, manganese, and cobalt, so the change might significantly reduce the future demand for such metals. BNEF reduced their projection of nickel use in batteries next year by 25%.