A revolution in the making: The future of batteries in 5 charts

This short essay is an extract from my newsletter Charts of the Week, where I make sense of the future of technology and its impact on society through data. This week, I share my thinking about the future of batteries, and what is driving this change.

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Goldman Sachs?forecasts a ten-fold increase in battery demand, an increase from their previous estimations. Although there are a range of challenges (e.g. supply chain complexity), the bank believes that this demand will be met and that innovations will continue to drive the price down.

Drivers are the key drivers

This increase in battery demand is mostly due to the rise of electric vehicles. And more batteries mean more raw materials, in particular, lithium. Lithium demand is growing more slowly than battery demand because of improvements in battery chemistry. Some have a higher energy density, some use fewer tricky metals like cobalt or rare earths, and some are cheaper.

Source:?BloombergNEF

Blighty’s million model milestone

This shift is happening globally, albeit along different timelines. In the UK, we’re about to get our millionth EV registration.

Source:?Tom Callow

Catch up, Americas

Automakers are planning to spend up to $515 billion in the next ten years to transition away from the internal combustion engine. This is mostly led by Europe and Asia, who have invested up to five times more than their North American counterparts. VW, with the largest investment, is the most committed of the traditional autos, and they recently announced a partnership with Redwood Materials to?support battery recycling.

Even the dinosaurs are catching up with the fragility of the gasoline/internal combustion engine complex. ExxonMobil, the largest American oil company, recently admitted they expect?every passenger car sold worldwide?to be an electric vehicle by 2040. Just three years ago, ExxonMobil forecast?that 30% of cars sold?would be EVs by 2040.

These recent forecasts also strike me as a lowball. For one thing, four of the top six global car makers intend to phase out gasoline vehicles between 2026 and 2035 (dates that keep moving forward). The remaining two insist on a 2040 phase-out. But in two major markets, China and India, there is a strong top-down push for EVs of different form factors.

As I wrote?seven years ago:

[...] the fossil industry / internal combustion business may be a fragile system (and not an anti-fragile one in the Taleb sense.) Small shocks to the system (decline in car ownership, reduction in hydrocarbon use, new competition, new mobility models) nick at the system and break it.

Every EV sold decreases the attractiveness of remaining in any part of the ICE business (gas stations, car servicing, working on ICE platforms in car firms) and makes owning an ICE less compelling. And the lesson from Russia’s invasion of Ukraine is that electrification may help you while being kept hostage by a violent dictator.

Source:?Reuters

Short the shorts

One thing to reflect on is whether this will necessarily lead to a lithium supply crunch. Taking a contrarian stance, Goldman suggests that it won’t, rather that supply will soon outpace demand. The growing market has spurred investment in supply and new countries (like Argentina, big players today) are angling for substantial market share. This might, the bank suggests, bring down the fundamental price of lithium over the coming year or two.

Source:?Goldman Sachs

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