Batteries are the core of modern life and are increasingly necessary for the shift to cleaner energy and transportation. But for something so vital, most of today’s popular batteries rely on metals that are not widely available, and battery production has been heavily geographically concentrated, mainly in China. 

This article discusses the current state of the battery market and potential breakthrough technologies, namely in solid-state and sodium-ion, for the EV market.

Market Outlook 

The demand for battery power, as measured in gigawatt hours, is expected to grow from 185 in 2020 to 2,035 by 2030, a whopping 11-fold increase, with nearly 90% of that coming from transportation alone. Lithium-ion is the most dominant rechargeable battery technology and accounted for just over 40% of the global revenue share in 2022, driven mostly by use in the EV industry. The second-largest share in revenue in 2022 belongs to lead-acid batteries, while lithium-titanate-oxide has been the fastest-growing product thanks to its fast charge capacity. The lithium-ion battery market is estimated to be $54.4 billion in 2023, and with an expected compound annual growth rate of 20.3%, it is expected to reach total revenues of $182.5 billion in 2030.

Lithium-ion concentration

The challenge with lithium-ion batteries is that lithium is typically found in only very low concentrations throughout most of the world, with mineable deposits rare, and most of them in South America. Chile is estimated to have the largest reserves, an estimated 9.3 million tons, with Australia coming in second at 6.2 million metric tons. In 2022, Australia was the largest producer at 61,000 metric tons, followed by Chile at 39,000 metric tons, China at 19,000 metric tons, and Argentina in fourth at 6,200 metric tons. 

Lithium-ion battery makers are also highly concentrated. The top ten lithium-ion battery makers accounted for 93.6% of the global supply between January and August 2023. Over one-third came from just one company, Contemporary Amperex Technology Co Ltd (CATL,) in China. Six of the top ten distributors accounting for 63.1% of production (between January and August 2023) are in China, three are in South Korea (23.4% of production), and one is in Japan (7.1%). 

This is the global market distribution of lithium-ion battery makers between January and August 2023:

9% from CATL (SZSE:300750) in China
9% from BYD (BYDDF) in China
2% from LG Energy Solution, a subsidiary of LG Chem (KRX:373220) in South Korea
1% from Panasonic (PCRFF) in Japan
Solid-State Battery Advances

Lithium-ion batteries use a liquid electrolyte that moves the electrical charge around. In contrast, solid-state batteries replace this liquid with ceramic or other solid materials, making it possible to pack more energy into a smaller space, particularly useful for EVs. Solid-state batteries also can move the charge around faster, which means shorter charging times. 

QuantumScape (QS), a U.S.-based company initially backed by Bill Gates and Volkswagen (VLKAF), has been developing a solid-state battery that it claims has three times the energy density of Tesla’s lithium-ion cells and charges to 80% capacity in just 15 minutes. Shares of the company got a boost earlier this month when the Department of Energy announced that it would make $3.5 billion available to support battery makers and lithium producers. The company has spent over ten years developing its technology, conducted over two million tests, and created over 200 patents and applications. In December 2022, the company began delivering the first 24-layer lithium-metal prototype to EV OEMs for testing. In its Q3 2023 report, the company stated that although its commercial target is for its cells to remain at 80% energy retention through 800 charge cycles, one of its prospective EV OEMs found that over 1,000 full cycle equivalents, the cells remained at over 95% discharge energy retention. 

Solid Power Inc (SLDP) is another early-stage solid-state EV battery technology company that recently announced the delivery of its first A Sample EV cells to BMW (BMWYY).

Sodium-ion Solutions

Recently, sodium-ion batteries have been making headlines with its potential to upend the lithium-ion industry and China’s domination of EV batteries. Sodium is cheap and abundant, and sodium-ion batteries don’t require other materials that are difficult to source. 

The privately held Swedish company Northvolt, founded by a former Tesla executive and backed by Volkswagen, Blackrock (BLK) and Goldman Sachs (GS), among others, announced earlier this month that it has developed a best-in-class sodium-ion battery validated for an energy density of over 160 watt-hours per kilogram. Most commercial lithium-ion batteries have an energy density range of 150-250 watt-hours per kilogram. For comparison, Tesla’s (TSLA) new 4680 cells have an energy density of 272-296 Wh/kg, which is very high by current standards.

On November 18, 2023, BYD announced that it is partnering with Huaihai Holding Group to build a sodium ion battery factory with an annual capacity of 30 GWh.

CATL is also looking to move into sodium-ion production this year, and those cells are expected to power Chery’s iCar brand.

In March, China’s JAC Motors (SSE:600418) joint venture with Volkswagen announced the world’s first EV powered by a sodium-ion battery. The five-seat passenger vehicle is expected to have a range of up to 250 kilometers (155 miles) on a single charge.

The Big Automakers

Toyota (TM) announced it would pursue a solid-state EV battery strategy over a decade ago, while other car manufacturers used liquid lithium-ion batteries. The company pioneered hybrid powertrains, but few of its cars have been fully electric. The bZ4x and RZ450e, both liquid Li-ion EVs, hit the market just in the past year. With the naming of its new CEO, the former president of Lexus, Koji Sato, the company is accelerating its commitment to EVs. It recently announced a dramatic expansion in models and battery tech with plans to sell 3.5 million EVs annually by 2030 across its Toyota and Lexus model lines. The company plans to have long-range battery packs that will have a range of up to 500 miles by 2026 and 620 miles by 2027. Eventually, Toyota plans to include vehicles with a 932-mile range with charging times of less than ten minutes.

Going in the opposite direction, General Motors (GM) recently announced that it is slowing its EV and self-driving car plans amidst new labor union deals. Instead, it announced a $10 billion buyback plan, will boost dividends by 33% and will cut spending on its self-driving unit Cruise. 

Ford (F) recently announced that it is also scaling back its plans for a $3.5 billion battery plant in Michigan. 

Stellantis (STLA) just announced plans for a joint venture with China’s CATL to develop lithium-iron-phosphate (LFP) batteries, which are less powerful but more durable than the nickel-cobalt-manganese ones found in most EVs, to support its production of high-quality but lower-priced EVs. The entry-level read-wheel-drive Tesla Model 3 uses an LFP battery. The company also plans to build a new Gigafactory in Europe with CATL to produce the LFP batteries.

The Bottom Line

The scarcity and the cost of lithium have presented challenges to the battery and EV industries, but the most cost-effective and less environmentally impactful alternatives are becoming viable. In the coming years, we will see a surge in Lithium-ion alternatives that can help reduce the environmental impact of EVs and make them more affordable and accessible to a broader range of car buyers.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: TSLA Feed: The Current State of the Battery Market: What Investors Should Know