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Friday Five

6th January 2023

Chinese battery makers CATL and BYD have increased their global market share to 50%. This is due to the electric vehicle boom in Asia’s biggest economy.

Chinese battery manufacturers have extended their dominance over global supply, with the top two producers reaching a combined market share of 50 per cent.

CATL, the supplier to carmakers including Tesla and Volkswagen, more than doubled battery sales to 165.7-gigawatt hours in the 11 months to the end of November—enough for roughly 3.3mn average-sized electric vehicles. This extends the company’s lead as the world’s biggest producer and takes its market share to 37.1 per cent, up from 32.2 per cent in 2021.

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The SNE report also showed “frightening” growth at China’s second-largest cell producer and EV manufacturer BYD, whose battery sales almost tripled to 60GWh over the same period giving it a 13.6 per cent market share.

As subsidies are withdrawn, the China Passenger Car Association expects electric car sales growth to slow to 30% this year.

Many analysts have predicted that CATL and BYD’s market share will drop as competition intensifies domestically and overseas, but this has not yet happened.

Kevin Shang, an energy storage analyst at consultancy Wood Mackenzie, said CATL is currently dominating the market due to its strengths in technology development, supply chain control, economies of scale and relationships with carmakers; however, South Korean companies and US clean energy policy could pose a threat in the future.

The SNE figures represent the battery capacity installed in electric cars that have been sold - meaning the ranking is influenced by model launches among carmakers with which they have supply relationships.

A further factor for Chinese groups' growth has been shortages and high prices of raw materials such as nickel and lithium - encouraging the adoption of cheaper Chinese batteries by European car companies such as Volkswagen and Volvo. 

CATL has ridden out some of the pressures that battery manufacturers are facing from soaring raw material prices - with net profit

World’s biggest Lithium producer bets on prices staying high despite supply rush
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Albemarle, the world’s largest lithium producer, expects high prices for the key battery metal to persist for years.

The lithium market crashed between 2018 and 2020 as it was swamped by oversupply and demand was hit after cuts to subsidies for electric vehicles. Prices dived from $25,000 per tonne to below $6,000 during that time.

But Eric Norris, head of lithium at the US chemicals group, said the market for the metal had fundamentally transformed after breakneck growth in electric vehicle sales. Prices have surged more than 10-fold since 2020 to record highs of almost $80,000 per tonne.

Albemarle is expected to pump out 130,000 to 140,000 tonnes of lithium carbonate equivalent this year from its assets in Chile, the US and Australia, with output processed in those countries as well as China. Its adjusted earnings before interest tax depreciation and amortisation is expected to jump fourfold this year on surging prices.

Goldman Sachs forecasts a sharp price correction to $11 000 per tonne of LCE by 2024 as China’s EV sector grapples with an oversupply of cars. Still, analysts say new supply is costly because of lower grades under development at new projects, which will keep prices from falling below $20,000 per tonne.

Australia’s government announced this month that lithium hydroxide prices are projected to dip to an average of $48,000 per tonne by 2024. They noted that many junior miners are currently in the process of developing new projects, which will result in expected shortages; however, battery manufacturers may have already anticipated new projects and built up their own inventories. Hence, if these stockpiles are large enough, prices could reduce faster than initially predicted.

 

But these are all unknown factors; the availability of lithium could be changed within moments based on this hypothesis, making it important for the industry to monitor the situation as it unfolds closely.

Panasonic, a Tesla supplier, seeks to balance US and Chinese markets in tech war

In an interview with the Financial Times, chief executive Yuki Kusumi said the Japanese conglomerate would also conduct a review to streamline its vast business portfolio “It is true that the decoupling of the US and China is becoming a bigger challenge for us,” Kusumi said

The company plans to invest $4 billion in a new factory in Kansas, which was partly aided by President Joe Biden’s Inflation Reduction Act.

The Kansas factory is likely to be partly funded by the ¥400bn ($3bn) Panasonic has set aside to invest in growth areas such as EV batteries over three years until March 2025.

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Another ¥200bn has been earmarked by Panasonic to develop hydrogen fuel cells and other new technologies

But Panasonic has also made an aggressive wager on the expansion of its home appliances and housing equipment business in China

Panasonic has also set aside $3 billion to invest in growth areas over the next three years and another $2 billion for developing new technologies.

Akio Toyoda, president of Toyota, warns that many car companies are concerned electric vehicles will not be able to end reliance on fossil fuels.
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Akio Toyoda, president of Toyota, recently warned that many car companies are raising concerns that electric vehicles may not end reliance on fossil fuels as hoped.

 

The processes and technology behind creating and powering electric cars are complex and there are also worries about the availability of materials to make such vehicles.

As a result, senior figures in the auto industry have been reluctant to address these reservations openly due to pressure to embrace more sustainable solutions. Despite this, Toyota has taken the first steps on its journey towards electrification by releasing six new electric models, demonstrating its commitment to transitioning away from petrol or diesel in the long term.

 

To further compete with other companies' plans for developing emissions-free cars, Toyota began investing in hybrid and hydrogen solutions to reduce carbon dioxide output; however, they now find themselves playing catch-up to keep up with the surge in demand for electric vehicles.

 

 

Neglecting this crucial shift could leave Toyota at risk of leaving itself out in the cold, providing rival carmakers an opportunity it would be wise not to overlook.

The Inflation Reduction Act's incentives for energy storage projects in the US came into effect on 1 January 2023

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The US clean energy industry will likely experience a transformation with the Inflation Reduction Act's incentive programs that came into effect on 1 January 2023.

 

By extending the investment tax credit for renewable energy investments to include standalone energy storage projects, clean energy firms have been given greater flexibility and certainty in their investment decisions.

 

These changes have opened up new opportunities in the sector and prompted major analysts such as BloombergNEF and Wood Mackenzie Power & Renewables to sky-rocket their predictions of storage deployment in the US.

 

Prior to these changes, only energy storage systems paired directly with solar PV and charged directly from it were eligible for an ITC; however, the new decoupled option creates more options for developers who are now free from this requirement.

Energy storage projects of 5kWh or more will be eligible under these new guidelines set forth by The Inflation Reduction Act.

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