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  Lithium-ion Battery Costs and Market Squeezed margins seek technology improvements &new business models Claire Curry July 5, 2017 These are sample slides from proprietary BNEF reports. See slide 11 for more information.  1 June 20, 2017 Executive Summary 1) Oversupply is depressing battery prices . Passenger EV sales were lower than expected in 2011-H1 2015, meaning demand for lithium-ion batteries was low. The manufacturing industry suffered  – and is still suffering --from oversupply. To increase utilization, manufacturers have been lowering prices and competing fiercely with one another.2) Tightening of the battery market . However, BNEF forecasts large demand growth for lithium-ion batteries, and battery manufacturers have announced further capacity build despite oversupply. They need to attract investment for this, although revenue from sales is still quite low, and say how they plan to make a profit from the new investment.3) Supply chain economics will make it tougher to meet demand .Without the supply chain in place, the battery market will not be able to meet future demand. The supply chain for battery components (cathodes, anodes, electrolyte and separators) is a complex business. There’s a looming shortage in production capacity for components, particularly the separator. EV sales growth in China, in particular, is creating separator supply bottlenecks.4) What’s in store? Further battery price decreases .BNEF forecasts lithium-ion battery pack prices will continue to fall to as little as $73/KWh. 5) Implications on company strategy: Battery manufacturer strategy . Producers need to improve margins on battery manufacturing to attract new investment. They can do this by improving technology to reduce production costs to bring down their cost forecasts. They are also entering the stationary storage market aggressively to increase market share. Car company strategy . Car companies want to reduce battery prices to improve their vehicle economics. They can do this by signing large, long-term contracts with suppliers; by entering other battery markets, and repurposing used EV batteries for a second-life.  2 June 20, 2017 Notes: This includes cells plus pack prices. For years where there were two surveys, the data in this chart is an average forthe year. Source: Bloomberg New Energy Finance The price of lithium-ion batteries in 2016 was$273/kWh  – a drop of 73% since 2010. 1000800642599540350 273 2010 2011 2012 2013 2014 2015 2016-20% -20% -7% -10% -35% -22% $/kWh ã The steep decrease in prices in the past few years is in part due to technology improvements and economies of scale. ã However, fierce competition between the major manufacturers has been instrumental in bringing down prices. BNEF lithium-ion battery price survey, 2010-16 ($/kWh)  3 June 20, 2017 WanxiangLEJCALBCBAKLishenSamsung SDIGuoxuan High-TechCATL AESCPanasonicBYDLG Chem Source: Bloomberg New Energy Finance. Lithium-ion battery sales for passenger EVs are picking up, but installed capacity is still much larger. ã Passenger EV sales were lower than the market expected from 2011 to H1 2015, meaning that lithium-ion battery sales were also lower than forecast. ã But 2016 and 1H 2017 have seen an increase in passenger EV sales, leading to quarterly battery demand of more than 6GWh. ã Panasonic has dominated sales due to its relationship with Tesla Motors. BYD has grown its market share significantly while AESC  – supplying to the Nissan Leaf  – shrinks. ã In 2016, new EV sales consumed over 20 GWh, while installed capacity was five times this size. ã Demand for batteries from electric buses far outstripped that of other passenger vehicles in 2016. Installed lithium-ion battery manufacturing capacity, Q1 2017 (GWh) Total: 103 GWh
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