The power battery market is booming with the soaring global EV sales this year. Currently, the world's top 10 battery manufacturers account for more than 90% of the total battery capacity installed (calculated based on battery capacity), indicating a large number of competitors. The strong and the weak, however, are clearly defined. Chinese brands claim as many as six of the top ten seats, followed by three from South Korea, and one Japanese brand completes the list. Battery manufacturers in Europe and the U.S. are not even part of the competition for lithium-ion batteries and can only pin their hopes on a new battlefield in the next phase, namely, solid-state batteries and lithium-sulfur batteries. According to the global battery sales report in October, the top three players, CATL, BYD, and LG Energy Solution, have explicitly formed a triumvirate, leaving other players far behind. In the meantime, each major automaker is seeking partnership with these battery manufacturers in order to stabilize the supply and price of the battery supply chain. BYD, which produces and sells its own batteries, is able to secure its market share of power batteries with its No. 1 EV sales worldwide. From the perspective of competition between countries, Chinese battery manufacturers account for nearly 60% of the market share this year, while South Korea and Japan account for 25% and 8%, respectively. Most South Korean and Japanese battery manufacturers work closely with automakers in Europe and the U.S., whereas Chinese battery manufacturers mostly rely on the demand of Chinese automakers, which is enough to support their rapid growth. In a few years, when auto giants launch new EVs to boost their share of EV sales across the globe, I think South Korean and Japanese battery brands will see their share gradually going up and rivaling Chinese battery makers.
The total global battery capacity installed was nearly 300 GWh last year, doubling from the previous year. It already reached 390 GWh in the first 10 months of this year and is expected to reach 470 GWh for the whole year, an impressive year-on-year increase of over 50%. Especially when battery technology continues to improve, the battery capacity of each vehicle will increase by year, so the annual increase in battery capacity installed will outdo the increase in EV sales in the coming decade. In terms of Taiwan's battery industry, TCC, Formosa Plastics, and Hon Hai battery plants will not be completed and start mass production until after 2024, and their planned annual production capacity will not exceed 5 GWh in total in the initial stage. If we calculate the CAGR (compound annual growth rate) at 50% for global battery capacity installed in the next three years, the annual total will reach 1,500 GWh in 2025, and if Taiwan's battery industry produces 5 GWh at the time, the volume will translate to a mere 0.3% share. This is obviously not an acceptable result to Taiwan, which is going all out to enter the EV industry. In terms of the upstream supply chain of batteries, Taiwan has plenty of manufacturers with sufficient technology in the production of key materials such as anode materials, cathode materials, electrolytes, and insulation film. Compared with Chinese, Korean and Japanese manufacturers, where are the right opportunities for Taiwan's battery industry to break out?
- Technology and cost. Battery types that do not rely on pricey raw materials like nickel and cobalt, such as lithium iron phosphate batteries, lithium-sulfur batteries, or sodium-ion batteries, will be the direction for Taiwan, given the lack of natural resources. In addition to research and experimentation on the chemical composition of battery cells, BMS (battery management system) and volume utilization efficiency of battery packs (integration with the car body) are two other critical technologies, also the key to cooperate with automakers. Taiwan's battery manufacturers should take the initiative to go further, instead of confining themselves to the battery pack per se, and conceive overall design and planning to meet the requirements of automakers. That's the way to win big orders.
- Find potential markets. No doubt, working with automakers is the most direct and effective way for battery manufacturers to expand business, but it is very difficult. The next best thing is to look for markets with prospects. I think the most suitable region for Taiwanese manufacturers is Southeast Asia. The domestic EV markets there, along with the positive, proactive government attitude towards developing the battery industry, can serve as crucial springboards for Taiwanese manufacturers to challenge the global market on the next level.
Power battery technology will be getting diversified. While lithium-ion batteries will continue to dominate the EV market for at least 10 years, other alternatives will embrace mass production in five years once the technology matures. Precisely for these reasons, the battery market race will become increasingly complex and dynamic, giving Taiwanese manufacturers, who are lagging behind big time, a great opportunity to catch up.