The market for Li-ion battery packs for BEV and PHEV is projected to reach approximately $180 billion in 2028, with a compound annual growth rate (CAGR) of 16.9% from 2022 to 2028, according to a report by Yole Developpement.
The battery cell supply chain is predominantly led by Asian players, with China accounting for 57% of the market share, followed by South Korea at 25% and Japan at 7%.
As the demand for electric vehicles (EVs) continues to rise, there will be an increasing need to recycle end-of-life xEV battery packs.
Yole.ev predicts that the total annual demand for lithium-ion battery packs used in PHEVs and BEVs will experience significant growth, surging from approximately 430 GWh in 2022 to around 1,500 GWh by 2028. This represents a more than threefold increase in demand. The primary driver of this demand will be BEV applications, which are expected to require a battery capacity of 1,370 GWh, constituting 90% of the total market in terms of GWh by 2028.
"The overall annual market for Li-ion battery packs designed for BEVs and PHEVs is anticipated to expand from about $70 billion in 2022 to approximately $180 billion by 2028," says Shalu Agarwal from Yole. "In 2022, CATL from China is the leading manufacturer of EV battery cells, followed by LG Energy Solution, BYD from China, and Panasonic from Japan. While Europe focuses on establishing local cell suppliers, US automakers primarily collaborate with Asian suppliers, like Tesla partnering with Panasonic, LG Energy Solution, and CATL, and GM Motors with LG Energy Solution."
Battery production capacity is rapidly expanding, with manufacturers announcing expansion plans, particularly in regions with xEV manufacturing facilities. Many Chinese players, including BYD, CATL, Gotion, and EVE, plan to increase capacity in countries like India, Indonesia, Thailand, and Vietnam.
The surging demand for EVs has created an urgent need for increased battery cell manufacturing capacity. Projections suggest that global battery manufacturing capacity will exceed 6 TWh by 2030, four times the demand. However, it is important to note that some announced projects may never materialize.
While China currently dominates the EV battery industry, overreliance on China could pose long-term challenges for startups and smaller battery manufacturers. Europe and the USA face cost disadvantages in the industry, mainly due to higher manufacturing costs. This cost discrepancy is linked to lower material costs in China, driven by advanced supply chains with vertical integration of material supply, processing, and manufacturing.
Both cell makers and automakers are seeking strategic deals with raw material mining companies to secure their supply chains. Low cobalt-content batteries like NMC 811 and cobalt-free LFP batteries are highly sought-after cell chemistries. Initially used by Chinese companies, LFP cells are now adopted by various global automakers.
The trend in battery pack design is shifting towards a cell-to-pack approach, aiming to enhance energy density and reduce weight. Companies like Tesla, BYD, and Leap Motor are integrating cells directly into the vehicle chassis.
Battery recycling has become a strategic focus for many battery manufacturers and car OEMs. Players are venturing into the recycling sector through subsidiaries, in-house processes, partnerships, or joint ventures with battery recyclers.