GENERATION NEXT - Lithium-ion based Hybrid Electric Vehicles (HEV) and Electric Vehicles (EV)

Growing concerns about climate change, increasing fuel costs and developments in battery technology is likely to result in an increase in demand of hybrid electric vehicles (HEV) and electric vehicles (EV). For the past couple of years the focus has been on developing GREEN and CLEAN vehicles.

The global market for Lithium-ion battery for HEV and EV is likely to be $12 to $15 billion in 2015. HEV & EV will be powered by Lithium-ion due to its features such as high energy density, high power density, safety, cost and life. Manufacturing of Lithium-ion cells is currently dominated by Japanese, Chinese and South Korean vendors. These companies operate in North America and Europe through strategic partnerships and subsidiaries.

As the Lithium-ion battery market for automotive applications is emerging, there is tough competition among the cell manufacturers, battery module integrators, and vehicle manufacturers. This has resulted in an increase in strategic partnerships and joint ventures among vendors, such as Ford with Magna (vehicle manufacturer with battery manufacturer), Johnson Controls with Saft (to promote Lithium-ion battery), Nissan & NEC (AESC), among others.

Figure 1 shows roadmap of battery technologies

Figure 2 shows the roadmap of lithium-ion chemistries

Governments around the world are offering incentives such as congestion charging exemption, rebates in road tax among other forms of tax to electric and hybrid car owners. Such incentives increases the attractiveness of HEV and EV, thereby creating a demand for them, which directly drives the demand for lithium-ion batteries. Similarly, the funding allotted in the U.S. Economic Stimulus Bill to develop the most suitable battery for these green cars encourages battery manufacturers. Installation of charging stations for EVs and PHEVs will support their volume growth, which is likely to have a direct impact on the demand of batteries. Many European countries such as the United Kingdom, Republic of Ireland, among others are involved in developing adequate number of charging stations that could enable the EV and PHEV users to charge their vehicles through parking at the charging station. Similarly, the U.S. is also planning to speed up the process of building these charging stations.

Efforts by consortiums such as Project Better Place, United States Advanced Battery Consortium (USABC), and the like promote the usage of EVs and HEVs. For example, these consortiums support the battery leasing model for reducing the initial and maintenance cost of batteries. These organizations have proposed standardization of battery packs to facilitate easy swapping of dead batteries at the service stations. These efforts are likely to enforce transparency and standardization of the HEV and EV battery market.

The overall battery cost forms a major portion of the cost of a EV; however, with new business models such as battery leasing, battery cost is removed from the equation and replaced by a relatively smaller premium. Such business models make EVs more attractive and, hence, drive the need for them, thereby resulting in the demand for Li-ion batteries. The battery leasing model is likely to gain high market appeal, as the maintenance of these batteries is also done by the leasing company. Hence, the operation cost is also reduced.

Cost of lithium used for producing the cathode and electrolyte is low when compared to that of nickel. In addition, about 3-6kg of nickel is required per kWh battery capacity in existing HEVs, whereas only 1-1.2kg of lithium is required per kWh battery capacity for advanced HEVs. Therefore, large-scale manufacturing of Li-ion is expected to reduce the cost of batteries to a large extent. The battery cost is expected to reduce up to half when the manufacturing volumes reach more than 10 million packs per year.