Is Brexit driving the right outcomes for battery production?

Advanced Propulsion Centre quarterly demand data shows South Korean companies have moved to fill Johnson Matthey’s ‘gap’ and Brexit is driving the right outcome for anodes and cathodes.

Key headlines

• • • • • • Europe still has a significant deficit in cathode and anode materials and separators but the picture is improving (slide 5)
          • South Korean CAM producers fill the gap left by Johnson Matthey (slide 4 and 6)
          • Brexit ‘rules of origin’ seem to be a catalyst in closing the gap (Slide 4)
          • 78% of UK manufactured cars and vans are expected to be BEV by 2030 (slide 11)
          • UK BEV production in 2030 is expected to be 3x 2025 levels (slide 12)
          • Global automotive battery demand is expected to be 16x higher in 2030 than it was in 2020 which will have a huge impact on critical material demand (slide 11)
          • A third of world demand for batteries in 2030 is likely to come from Europe (slide 13 and 22)
          • In the theoretical scenario that 100% vehicles were BEV by 2030 there is still opportunity for gigafactory investment (slide 22)

Availability of vital components used in electric vehicles has improved in the last quarter according to the latest Advanced Propulsion Centre (APC) data – and Brexit could be the catalyst.

APC updated demand figures (March 2022) – which use insight gained from their unique role between the automotive industry and government – shows that the cathode and anode deficit across Europe is an improving picture as Dave OudeNijeweme, Head of Technology Trends, explains:

Our analysis shows that assuming all the proposed gigafactories are built to the assumed size timescales, Europe might be self-sufficient for cell manufacturing around 2025. However, a far less reported area is the potential deficit of the high value-add material that make up batteries. Our analysis shows that real pinch points might occur around anode, cathode, separators and foils in Europe by 2025, with anode active materials largely imported from Asia. That said, while Johnson Matthey announced they were exiting the batteries business, South Korean cathode active material [CAM] players Posco and EcoPro have announced very large investments in Europe to supply cell manufacturers such as Samsung, LG and SK. Their announcements of 70 kilotonnes and 108 kilotonnes respectively is a significant step towards Europe being self-sufficient by 2027.

2027 is an important milestone because this is when the final stage of the Rules of Origin, from the Trade and Cooperation Agreement with the EU, come into force (often described as the ‘Brexit deal’). Those rules state that 55% of the value of a vehicle and 65% of a battery cell (again, value not volume) must be ‘local’ in order for the vehicle to NOT attract tariffs – meaning localising supply in the UK and Europe becomes even more important for vehicle manufacturers where margins are tight.

As the CAM makes up such a significant part of the vehicle value add, it virtually forces the need for local CAM supply.

Dave continues:

Until that point, we believe that most OEMs can achieve the minimum of 40 and 45% now and from 2024 respectively. We predict that there still will be a gap of at least 150 kilotonnes of CAM materials (equivalent to the battery materials needed for approximately 150,000 vehicles using 70kWh battery packs), which might pose a significant issue for those cell manufactures and OEMs who have not managed to localise enough of their supply chains.

Other key facts that come out in the APC demand data include:

• UK BEV production in 2030 will be 3x 2025 levels (slide 12)
• Battery demand will be 16x higher in 2030 than it as in 2020 which will have a huge impact on critical materials (slide 11)
• 78% of UK manufactured cars and vans will be BEV by 2030 (slide 11)
• A third of world demand for batteries in 2030 will come from Europe (slide 13 and 22)
• In the theoretical scenario that 100% vehicles were BEV by 2030 there is still opportunity for gigafactory investment (slide 22)

The Advanced Propulsion Centre is the organisation tasked by the UK government and automotive industry to accelerate the transition to low-carbon transport solutions. They use their unique insight, gained from working closely with the global automotive industry to provide insight and forecasting to support government with strategic policy decisions and also to provide clarity to the industry about the projected demand, product and technology roadmaps.