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Battery manufacturing: Only the lowest-cost producers will survive

Over the last year and a half, cell production costs have plummeted, due to falling lithium prices, increased automation and technology advancements. Furthermore, due to huge oversupply within the Chinese market, margins are hovering close to 0%, resulting in low cell prices but financial difficulties throughout the market.

Therefore, being able to produce cells at the lowest production costs is paramount for survival during these tough times, and this is an area where newcomers to the industry are struggling.

Chinese companies have a 20-year head start, resulting in highly optimised manufacturing process, and an industry where vertical integration is strong, enabling top producers to lower costs even further (second graph).

This results in new manufacturers in Europe and North America facing several barriers in achieving cost competitiveness.

Therefore, the focus should be shifted away from producing the most advanced technology, and towards producing good-enough cells, with low scrap rates, automated factories in locations with cheap electricity.

Doing so could enable newcomers to the industry to rapidly reduce production costs, giving a pathway to early revenue that could be reinvested into R&D.

Read more about the current landscape for battery production here: https://lnkd.in/ew42aAAH

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