Surging demand for battery cells gives rise to an opportunity for European machinery and equipment manufacturers to supply emerging gigafactories.
Recent breakthroughs in e-mobility will result in unprecedented demand for electric vehicles (EVs), despite the economic and supply disruptions that resulted from the COVID-19 crisis. With this rising demand will come a huge jump in demand for batteries. Battery manufacturing is ramping up around the world to match local demand. To serve European EV manufacturing, established battery cell companies and emerging startups have announced plans to build combined production capacity of up to 965 gigawatt-hours (GWh) per year in Europe by 2030—accounting for 28 percent of 2030’s announced global capacity of around 3,500 GWh and increasing 20-fold from 2020 To meet growing demand, roughly 30 new battery-manufacturing facilities will need to come online across Europe, requiring up to €100 billion in capital expenditures (Exhibit 1). Roughly 60 percent of the total investment will be earmarked for battery cell manufacturing equipment. This translates to a €5 billion to €7 billion annual business opportunity for the manufacturing-equipment industry in Europe by 2025 and €7 billion to €9 billion in the second half of the decade.
In the battery cell manufacturing process, three steps require roughly equal shares of capital expenditures: 25 to 30 percent for electrode-manufacturing equipment, 25 to 35 percent for cell-assembly-and-handling equipment, and 30 to 35 percent for cell-finishing equipment (Exhibit 2). Some processes, such as coating and electrolyte filling, are either unique or highly specific to battery cell manufacturing. These processes require clean- and dry-room conditions and expertise in, for example, high-accuracy thin-layer deposition. Other processes, such as slitting, cell formation, and aging, are similar to processes that are widely used in other industries or require intramanufacturing-logistics equipment.
Today, only a handful of companies that specialize in battery cell manufacturing equipment—used for slurry mixing, electrode manufacturing, cell assembly, and cell finishing—are operating in Europe; the majority are in China, Japan, and South Korea (Exhibit 3). However, most of these incumbent battery cell manufacturing suppliers are operating at more than 95 percent capacity, leaving little room to increase output. Moreover, they may prioritize orders from established customers (mostly leading incumbent cell manufacturers) over those from new market entrants from Europe and the United States. As a result, European battery cell manufacturing companies and EV OEMs who enter the field are likely to face a bottleneck in equipment supply that will place their planned start of production at risk. Securing equipment supply is a key success factor.
European equipment manufacturers have an opportunity to capture a fair share of the revenue pool by becoming key suppliers to established cell manufacturers that are expanding into Europe and the United States, as well as to newly founded battery manufacturers, given their geographic proximity, which facilitates the installation, ramp-up, and support for equipment. Equipment manufacturers that already sell the needed equipment could expand their capacity to meet surging demand and approach existing and new customers. Meanwhile, manufacturers that do not currently sell the equipment needed to produce battery cells could leverage their existing machinery and equipment expertise from similar processes to pivot into this market. This article discusses the anticipated shortfall in equipment and presents options for equipment suppliers to fill this void.
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