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EV battery overproduction is a growing trend, according to a major automotive research firm. The trend may lead to multiple startups folding, say the market researchers.  (Source: World Car Fans)
Only six to eight global manufacturers will survive, according to the study

You can hardly browse a tech or automotive news site these days without being overwhelmed by a deluge of electric car news.  From the plug-in Prius, to the Chevy Volt, to the sexy Porsche plug-in concept, there's a wealth of designs; in fact every major automaker has unveiled a plug-in or electric concept in some form over the past few years.

As the automakers race to beat each other to market and achieve the lowest price point in their target sector, an integral component is the lithium-ion batteries that store the energy that powers the vehicle's electronic propulsion systems.  

Recent studies have indicated that there's enough lithium resources to survive the electric vehicle (EV) boom.  However, a new study by automotive strategy consultation firm Roland Berger and Wolfgang Bernhart, an expert on alternative energy powertrains, says that the EV battery industry may be headed for trouble.

The industry's aggressive production increases and cost cuts will likely fuel an unsustainable business model, according to Roland Berger.  It predicts that by 2015 there will be demand for 0.82 million "EV equivalents" (a number representing the diverse production population of hybrids and electric vehicles).  Installed capacity they predict will be 2.6 million EV equivalents.  By 2018 demand will likely jump to 3 million EV equivalents yearly.

By 2015, they predict that there will be a 200 percent overcapacity in batteries.  That overcapacity will be worsened by international government grants, which will push for more investment.

The result will be that many companies will go extinct, states the consulting firm.  Describes Mr. Bernhart, "Manufacturers of lithium-ion (Li-ion) batteries currently enjoy a great amount of hype, but massive consolidation is expected to come in the next 5 to 7 years."

He estimates that in 2015 a new cell chemistry will cost approximately €50-100M (approximately $65-135M USD), while a new 100,000 unit plant would cost €350M ($475M USD) to construct.

He says that despite the threat to companies like LG Chem and A123 Battery Systems, there is hope for those that can weather the overcapacity storm.  He describes, "Unfavorable factors are piling up. But managed correctly, electrified powertrains will still be a profitable market in the future."



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But we are creating green jobs!
By bdot on 3/2/2010 9:48:37 AM , Rating: 1
Government distorting markets at its finest. "Creating" green jobs with subsidies and tax credits!




RE: But we are creating green jobs!
By Iaiken on 3/2/10, Rating: 0
RE: But we are creating green jobs!
By bdot on 3/2/2010 11:33:26 AM , Rating: 5
Your right, the government hasn't mandated tighter fuel economy or handing out green tech grants. The gov also isn't handing out consumer tax credits for buying say a Chevy Volt. No that isn't the gov.

These are market distortions sir. A demand that would otherwise not have existed. Industries made to seem more attractive then they would have otherwise.


RE: But we are creating green jobs!
By Solandri on 3/2/2010 3:46:52 PM , Rating: 5
Pollution by its very nature is a market distortion. The costs of polluting are borne by all of society, not exclusively by the polluter. So doing nothing about pollution already distorts the market. It's called the tragedy of the commons, and is one of a class of cases in game theory where you can prove mathematically that a completely free market will not arrive at an optimal solution.

http://en.wikipedia.org/wiki/Tragedy_of_the_common...

The role of government in a tragedy of the commons situation is to attempt to correct the distortion by applying costs and/or regulation to offset the distortion - to set up a regulatory framework so the costs of pollution are correctly borne by the polluter. So the government doing this stuff in and of itself isn't necessarily distorting the market.

The real question is how much "correction" by the government is the right amount. At some point you've exceeded what's needed to compensate for the market distortion caused by pollution, and it really does becomes market distortion by government influence.

The Alaska commercial fishery is a good example where government intervention has corrected a tragedy of the commons situation. Whereas most fisheries around the world are being depleted by overfishing, the Alaska fish stocks are widely regarded as the most healthy in the world. There has, however, been some charges that the Alaska Dept. of Fish and Game overprotects the fishery, and that more fish/shellfish could be harvested in a sustainable manner.


By lightfoot on 3/2/2010 4:31:29 PM , Rating: 3
Although if you want to properly account for the costs of pollution, it would be far easier (and better) to tax the pollution. Attempting to select winners by subsidizing unproven technologies is not a good strategy over the long term.


By albundy2 on 3/3/2010 7:15:52 AM , Rating: 2
there are many "overprotected" things in Alaska... damn hippies


RE: But we are creating green jobs!
By bdot on 3/2/2010 11:44:06 AM , Rating: 3
http://www.allcarselectric.com/blog/1033931_a123-s...

is that 249 million tax payer dollars to build more batteries?


RE: But we are creating green jobs!
By lightfoot on 3/2/2010 11:44:05 AM , Rating: 2
quote:
The problem is that numerous battery manufacturers have popped up to try and fill the gap that was created by demand for batteries.

And the demand for batteries was created by the government when they decided to start subsidizing hybrid and electric vehicles. Other aspects of this problem that are directly created by the government include:
- Restricting domestic energy exploration.
- Providing subsidies and grants to "green energy"
- Threatening to increase taxes on conventional energy sources.

Without these four factors the automotive lithium ion battery industry would be virtually non-existant. Maybe you should also review the problem before stating that it "has nothing to do with the government."

It has EVERYTHING to do with Government.


RE: But we are creating green jobs!
By Iaiken on 3/2/2010 1:27:14 PM , Rating: 4
quote:
And the demand for batteries was created by the government when they decided to start subsidizing hybrid and electric vehicles.


Try again...

The sales of the Prius in Japan have been exploding in the absence of such government interference. Almost every single battery that Panasonic makes now is already spoken for by Toyota. Love it or hate it, the Prius would have been an international success regardless and the US/Canadian tax breaks for the car were an unnecessary waste.

As volume has ramped up and engineers revised the design, the cost of the Prius has come down significantly and is a model of just how successful and profitable hybridization can be.

quote:
Restricting domestic energy exploration.


You can't possibly be silly enough to think that the drop in the bucket that is US domestic oil would do anything other than line the pockets of the oil industry?

quote:
Providing subsidies and grants to "green energy"


Again, indirectly and only where those green technologies use battery technology.

quote:
Threatening to increase taxes on conventional energy sources.


Threatening is not the same as doing...

For a nation that undertook such great endeavors as the space program, the hoover dam, the Panama Canal, the golden gate bridge, the interstates system among other things, I find it funny that people are so adamant against planning for the future unless it means more new fighter jets.


RE: But we are creating green jobs!
By bdot on 3/2/2010 5:44:39 PM , Rating: 2
For the love of.. you don't seriously believe Japan isn't subsidizing this too?!

http://search.japantimes.co.jp/cgi-bin/nb20090707a...

http://www.reuters.com/article/idUST7890620090814

http://www.leftlanenews.com/subaru-to-launch-plug-...

Are you just saying things that sound good in your head?


RE: But we are creating green jobs!
By Laereom on 3/2/2010 9:04:28 PM , Rating: 2
The US produces 8.514 million barrels of oil per day.
The US consumes 19.5 million.
Most of the rest comes from Canada and Mexico.

Although we don't produce all, or even the majority of our oil, calling it 'a drop in the bucket' is just stupid.


RE: But we are creating green jobs!
By homebredcorgi on 3/2/2010 9:47:08 PM , Rating: 2
And oil is priced on a world-wide market, which is what you should be comparing our production with. On the world market, any increased production we would see from say opening up drilling in ANWR would be a drop in the bucket. It would not lower prices even a penny (let alone the fact that it would take a good decade or so before the infrastructure was in-place to extract this oil). Would it reduce our dependency on Canada? Perhaps, but what exactly is the purpose of doing so?


By pastabrain76 on 3/3/2010 11:33:20 AM , Rating: 2
To be more precise, spot oil is priced on regional basis that tends to be indexed to crude standard, which is based on heavies and sulfur content. There is no single price for a barrel of spot oil. It runs a very wide range, not to mention the majority of the world's oil is produced under long term contracts. In and of itself, it does not set the short term price refineries and petrochemical plants pay for oil.

What the spot price does though, is set the marginal price (read market price) for petroleum based products like gasoline, diesel, fertilizer, petro-chemicals, etc... I agree that production in ANWR will not move the market for oil. Only two things will move the market. Substantial increase in cheap oil production (i.e. two million barrels per day that is profitable below the spot price) or substantial reduction in global petroleum use (moves price back down the supply curve.) For the record, in my opinion ANWR oil will not be cheap oil.


RE: But we are creating green jobs!
By sinful on 3/2/2010 9:14:07 PM , Rating: 1
quote:
And the demand for batteries was created by the government when they decided to start subsidizing hybrid and electric vehicles. Other aspects of this problem that are directly created by the government include:


Everything you're complaining about applies 10X AS MUCH TO OIL.
Oh but that's right, when Americans do it, it's "Market Interference", but when some rich Middle Eastern oil baron manipulates the market, we should let it be!

So, basically, you're OK with it as long as Americans are getting robbed blind?

quote:

- Restricting domestic energy exploration.
- Providing subsidies and grants to "green energy"
- Threatening to increase taxes on conventional energy sources.

And you don't think the oil industry has done everything in its power to quash non-oil production? That they aren't getting massive subsidies and grants for "dirty energy" by middle eastern countries?
That those companies aren't trying everything in their power to artificially drive up the cost of alternative energy?

quote:

Without these four factors the automotive lithium ion battery industry would be virtually non-existant. Maybe you should also review the problem before stating that it "has nothing to do with the government."


And without interference from big oil, we would have dropped oil after the 1970's oil crisis.

At this point, anything the government does is basically trying to "right the balance" in the free market, trying to correct massive distortions that big oil has put in place.

You're basically saying
"I'm against the free market, and I only want middle eastern countries to be able to distort the market, even if it means I have to pay much more money in the long run -- just don't try to 'un-distort' the marketplace!"


By pastabrain76 on 3/3/2010 12:19:48 PM , Rating: 2
Though I agree that OPEC can currently distort the market, they can only do so when we give them that power. By allowing Non-OPEC supply to shrink as a percentage of the market, the developed world gave them that power.

The fact is oil prices are held artificially high because there is an under-supply of petroleum. I say there is an under-supply because the price of a barrel of oil is no longer determined by the marginal price of a barrel of oil. If it were, the price would be ~$50/bbl, which is roughly the cost of producing oil in some of the more depleted fields in Western Texas. A couple years ago, this was the most expensive crude to produce and I assume it remains so today.

Of course, supply restriction is not the only determinate of price right now. It is also largely influenced by price control in OPEC and Communist countries. By underwriting their own cheap domestic fuel prices, OPEC countries like Iran and Venezuela create an artificial increase of in-country demand. China does the same thing with price supports underwritten by the country's tax base.

Now, if you want to believe that the big oil boogy-man is the reason for not shifting away from oil, go ahead and believe that. The fact is fossil fuels, from a market price perspective, are still cheaper than alternative fuels which are currently limited by infrastucture, production and storage capacity.

As far as American's being robbed blind, I would recommend you read the book, "The Seven Sisters: The Great Oil Companies and The World They Shaped." The man who wrote it is not a Big Oil shill, and reveals a very factual and mostly non-biased accounting of how the industry developed. It will offer a very insightful look as to how the Western World precipitated the creation of OPEC by robbing them blind. In fact, one can make a strong argument that when adjusted for inflation and stunted economic development, we have taken far more from the OPEC countries than they have ever taken from us.


No Problem
By Flunk on 3/2/2010 8:56:11 AM , Rating: 3
It's an interesting conjecture but 6-8 manufacturers is more than enough to keep healthy competition going so there shouldn't be an issue for us consumers or the car manufacturers.




RE: No Problem
By acase on 3/2/2010 9:05:56 AM , Rating: 4
True, and I suspect these 6-8 companies will probably just be expanding and buying their competitors more often then they will just be going out of business and shutting down.


RE: No Problem
By amanojaku on 3/2/2010 9:37:51 AM , Rating: 2
If this study is indeed correct (we'll know in 10 years) then the best we can hope for is mergers and acquisitions. The worst that can happen is more unemployment considering the 50+ suppliers expected to be out of business.

The third scenario is alternative battery technology will make the lithium supply issue moot. That's the way it should be; if all you can do is keep making the same stuff you're not competitive and it's only a matter of time before you're gone.


RE: No Problem
By MrBlastman on 3/2/2010 10:42:57 AM , Rating: 5
What I can't believe is someone wasted money on a study like this. I don't think we needed to pay someone to tell us what has been happening for decades.

Many small companies start making a product.

One company makes a product better than the rest (or a few do).

These better companies buy the other companies and grow.

Smaller companies that hold out but can't compete go out of business.

Repeat for next cycle. I am suprised the study did not say that subsidies are needed to save the businesses from going out of business due to the oversupply. Truth is, none or needed. This is the natural cycle of business/product progression.


RE: No Problem
By Iaiken on 3/2/2010 10:51:19 AM , Rating: 2
ZAT IS A BINGO!!! :D


RE: No Problem
By Samus on 3/2/2010 12:03:21 PM , Rating: 2
6 to 8 companies? Isn't it safe to say most large industry in the world can be narrowed down to 6-8 companies per market segment?


RE: No Problem
By HVAC on 3/2/2010 9:53:45 PM , Rating: 2
Exactly! Let us all thank the author of the original hype: Captain Obvious!

Signed,

Corporal "Quote the entire article and then add:" I Agree.


RE: No Problem
By bdot on 3/2/2010 9:40:44 AM , Rating: 2
If the problem is over capacity then factories would have to be shut down or have a reduced work load , which would mean fewer employees.


Current Li-Ion is a stopgap
By piroroadkill on 3/2/2010 9:22:15 AM , Rating: 2
Nothing more. Even Ovonics' NiMH has been more suitable for EV design for some time due to not requiring such rigorous temperature monitoring. There's a reason why all current EVs use NiMH.

Either we switch to a battery tech that allows for fast charging (such as Altairnano's battery) or one that has massive energy density (at least double that of Li-ion). Either way, we need to figure it out, and we need to do it at a much lower cost than is currently available.

A consumer is less likely to pick a more expensive, less capable vehicle, over a less expensive, more capable vehicle (even with rising gas prices, less initial outlay is preferable, people are short-sighted).




RE: Current Li-Ion is a stopgap
By invidious on 3/2/2010 1:07:22 PM , Rating: 2
Short sighted has nothing to do with it. Its risk vs reward.

What if electric prices skyrocket after you paid the high initial price you still have to pay high fuel prices, perhaps higher than gas. What if gas prices drop due to new technologies or just finding new fields? What if a new type of energy is found before you get a chance to take advantage of your "long term" savings? What if the next gen of EVs is twice as efficient as this one and you get screwed for being an early adopter?

As an EE I would love to see EV's reach their potential, but they are not there yet. Battery technology and manufacturing is still 5-10 years behind.

I will be sticking with dependable gas until there is overwhelming and irrefutable reason to change. I am not going to buy one because its going to save the planet or because its government subsadized at the moment, or because its trendy. If and when I go EV it will be because it is a proven tehcnology and is going to give me more for my money.


By piroroadkill on 3/2/2010 4:29:02 PM , Rating: 2
Also, I screwed up of course, the Tesla uses Li-ion, but in nmubers, the Prius far far exceeds anything else we have out there using batteries for propulsion, and it uses NiMH


Business as usual
By Xavier434 on 3/2/2010 9:22:55 AM , Rating: 2
Is this actually unusual or even a problem? I would think that it is normal for many interested companies and organizations to race to be the winner here. At the end of the race, the winners receive there prize which is to continue making a lot of money off of this industry while the losers either move on to other things.

Naturally, the more competition we have the better but I think it is unrealistic to expect everyone to last once this race is over. What has history taught us when these kinds of races occur? I would imagine that the process is very similar to what we are projecting here.




RE: Business as usual
By pastabrain76 on 3/3/2010 10:04:49 AM , Rating: 2
It's not unusual, and there are two primary lessons history teaches us in this situation. The first is the situation described, if it happens, is typically good for the consumer as it drives down prices. The second is, that when someone spots a bubble before it actually occurs it usually doesn't because there is too big of a disincentive (read bankruptcy) in business to let the consumer win too big.


By drycrust3 on 3/2/2010 10:57:31 AM , Rating: 2
quote:
It predicts that by 2015 there will be demand for 0.82 million "EV equivalents"


The problem I see with this sort of statement is it presumes that the old technology will be preferred to the new technology. As we have seen so many times in the past (e.g. ball point pen vs fountain pen, 35mm camera vs digital camera, valve amplifier vs solid state amplifier, copper based telecoms cabling vs fibre optical cable, horse and buggy vs motor car, etc) when a new technology comes along it often has a very slight advantage over the old technology. That very slight advantage gives users bigger options in comparison to the old technology, which in turn gives greater uses, which means more research, which gives greater advantages and better manufacturing techniques, which lowers prices, which increases popularity.
As we saw with the digital camera revolution, once the cost of a basic unit gets down to less than the cost of a few years use with the old technology then people will ditch the old technology very quickly.
Currently there isn't really any significant advantage with electric vehicles in comparison to petrol, both need time outs to refuel / recharge (and petrol is quicker), but there is one big advantage electricity has over petrol: reduced air pollution. That probably isn't enough to currently push people into preferring it over petrol, but don't be surprised if once a bigger advantage comes along then they will.

Don't forget:The biggest advantage of a new technology is something you haven't thought of.




Great
By NovoRei on 3/2/2010 11:13:58 AM , Rating: 2
LiPO, LiFePO and others shall cost a penny and not hundred dollars.




ok
By rudy on 3/2/2010 8:49:07 PM , Rating: 2
So what they are saying is that this will be like every other new industry? wow.




STUDY!
By HVAC on 3/2/2010 9:55:21 PM , Rating: 2
Study: More journalists available than interesting news stories. Film at 11!




There will be no over-supply
By pastabrain76 on 3/3/2010 9:57:41 AM , Rating: 2
This is typical consulting drivel from a firm trying to drum up business. They want to sound insightful about the bubble that is about to occur in your industry. I deal with this every day. There are at least four opportunities for every one of these companies to avoid a bad investment due to over-supply. They aren't secrets. And it's the reason you don't see lots of over-supply developing in most industries.

http://pastabrain.blogspot.com/2010/03/automotive-...

Trust me, when you have hundreds of millions of dollars of investment on the line, the appropriate monitoring and business decisions occur to avoid drastic over-capacity situations.




The actual "news" portion of this article...
By iFX on 3/2/10, Rating: -1
RE: The actual "news" portion of this article...
By XZerg on 3/2/2010 9:03:16 AM , Rating: 3
And for those who want some background and the context - start from the top.


RE: The actual "news" portion of this article...
By iFX on 3/2/2010 9:43:16 AM , Rating: 1
The background being? The first paragraph contains no fewer than four links to past DT articles. This is done solely for the Google search bots so people coming here from Google will be fed other DT links right off the bat.

All the "back ground and context" can be presented AFTER the relevant news has been.


"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain














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