How to benefit from the ever-growing battery pack market while staying differentiated
What are the drivers and market dynamics helping the battery pack market to reach $87.3 billion by 2023?
The strengthening regulations for reducing CO2 emissions and needs for the reduction of air pollution in cities are the strongest drivers for battery applications, such as plug-in hybrid electric vehicles (PHEVs), full battery vehicles (BEVs), electric buses and trucks, and stationary battery applications analyzed in this report.
The total 2017-2023 Compound Annual Growth Rate (CAGR) for those applications is 27.6%, as shown in Figure 1, but the growth rate for different applications varies, as their market dynamics have various drivers.
PHEVs enable big CO2 emission reductions due to their electric engines, while keeping long driving ranges thanks to their Internal Combustion Engines (ICEs). But the global market will mainly be driven by full electric vehicles, for which sales will surpass $51.6 billion value by 2023. BEVs, considered as zero-emission vehicles, are eligible for more incentives than PHEVs. The hurdles for faster deployment of BEVs are the high price for batteries and still relatively short driving range. Strongly decreasing battery cell costs, together with continuously improving cell technologies, play in favor of using larger-capacity battery packs, enabling longer driving range, and thus greater BEV deployment.
The high level of air pollution in some big cities is driving deployment of electric buses. Buses stop frequently and can potentially charge at each stop or terminus station, making them well-suited for battery power. Electric trucks can then benefit from battery development for buses. The use of electric trucks in the urban environment can then help further reduce air pollution.
Large-scale deployment of renewable energy sources and distributed energy supply models puts greater demands on electricity grid frequency voltage and frequency stabilization. Batteries can serve this purpose well, enabling better integration of intermittent renewable energy sources such as solar photovoltaics with the grid. As shown in the report, big battery packs for grid applications will feature the second-fastest market growth, with 2017-2023 CAGR of 57.1%. Small battery packs, between 1kWh and 20kWh, driven mainly by residential photovoltaic-plus-storage installations and back-up energy supply grow fastest, with a 58.7% CAGR.
The market for each battery pack component is growing but at similar rates
Battery cells form the main part of the global battery pack market studied in this report: They will represent 58.8% of the total market value in 2023.
The second largest part of the battery pack market will be represented by Battery Management Systems (BMS). The importance of BMS is growing with increasing requirements to accurately determine remaining battery capacity, and with increasing cell and pack energy capacities.
According to Yole Développement’s analysis, there is no big technology breakthrough expected in coming years regarding battery cells and other battery pack components. As shown in Figure 2, the main trends will involve existing technology solutions, which will be further improved and more widely deployed. Technology and cost improvement will be steady. The big changes, such as the transition to 800V battery pack voltage for BEVs, will be realized first by a limited number of car manufacturers and then progressively implemented by other companies.
The report explores the hurdles impeding faster technology evolution, such as the divergent needs of different applications and variety of technology approaches used.
Some companies have developed specific internal know-how and intellectual property (IP) and established related supply partnerships, meaning that they might remain at least partially stuck with their historical technology and integration choices. This offers opportunities to newcomers with better-performing technology and business approaches.
Consolidation for cost reduction and diversification to avoid direct competition: How to get the best of both worlds
The battery pack market is growing, attracting ever more players. Those companies enter the battery pack market either as newcomers, or players already involved in some battery segments get more integrated.
Yole Développement has identified that battery pack makers address increasingly tough market conditions either by technology and supply chain consolidation to drive costs down, or by differentiation via their product offering.
A growing number of companies, especially carmakers, purchase cells from established manufacturers with high-volume manufacturing capacity that have mastered both technology and manufacturing processes. The carmakers define the cell designs and desired characteristics. This enables them to keep a certain level of product differentiation at the cell level, while keeping cell costs and performance at better levels compared to in-house manufacturing. Cell makers are becoming increasingly integrated, offering cells packaged in module form. The modular battery pack approach enables further manufacturing cost reductions but keeps the design flexibility for battery packs. Battery pack can then increase this differentiating added value further by carefully designing the battery pack, and choosing components including the BMS, thermal management solutions, safety devices, electrical interconnects, housing and assembly.
Objectives of the Report
This report’s objectives are to:
- Provide market value for Li-ion battery packs and their components including Battery Management Systems, thermal management, safety components for plug-in hybrid electric vehicles, battery electric vehicles, electric trucks and buses, and stationary battery energy storage systems.
- Demonstrate the strong, consistently-growing potential for power electronics players, including suppliers of power integrated circuits, fuses, and thermal management solutions in the energy storage business, based on Li-ion battery technologies
- Discuss market opportunities for players that can supply materials, devices, or technology solutions to the Li-ion battery pack industry
- Provide insights into different technologies currently used, technology trends, and newest innovations for battery pack components
- Cover a large variety of different products and technology solutions used in battery packs – products/solutions that provide strong differentiation, add a lot of value and allow for application-specific solutions to be devised
- Provide a supply chain landscape, including the key players for battery cells, battery packs, and battery pack components and associated business models
- Electric bus and electric truck applications and forecast added
- Deeper insight into battery management systems, safety devices and thermal management of battery packs