Electrification brings radical change to the automotive industry – change that not only affects OEMs and end customers, but the entire supply chain involved. In an electrified powertrain, the traction battery is the single most valuable part. It also largely defines vehicle range, which is of high importance in customers buying decisions. OEMs and suppliers are busy finding their positioning along the emerging battery supply chain to claim their stake in its value. This study examines opportunities for suppliers of automotive battery systems and battery components to grow profitable businesses for the electrified automotive future.
In the first step, we analyse original equipment manufacturers’ (OEMs) demand for automotive battery systems by combining views on make-or-buy and technology strategy. Integrating data for battery market price development as well as bottom-up data for light-duty vehicle production, we forecast a global market potential of € 113 bn for battery electric vehicle (BEV) batteries in 2030 – equal to an average battery value of € 5,200 per car.
To engage in this market, suppliers can select one out of four different supplier plays from component to system level. We expect most OEMs to source battery cells as complete sub-system or even higher integrated as complete battery system. Only for Global Volume OEMs, we see the potential to enter the cell business on component level. In addition to the cells, we consider housing, electrics / electronics and thermal as the other sub-systems of a battery pack. Large OEMs consider these other subsystems an opportunity to sustain employment – which is much needed since BEVs are less labour intensive in assembly. In turn, they will aim to keep value creation in-house by sourcing from component suppliers. In contrast, we forecast niche as well as new OEMs to opt for sourcing on higher integration levels.
In the second step, we analyse actual supplier offerings from a financial perspective by assessing the battery system’s value structure and viable integration paths from component to system level. For a BEV battery pack, the cells are the most valuable sub-system accounting for 74% of system value. Today, global cell supplies are shared between few Asian companies. We do not see economic incentives for these cell suppliers to expand to system level for three reasons: (1) Cells yield the highest margin potential within the battery, (2) cell production requires deep technological and process knowhow, and (3) cell types can be standardised. For suppliers specialised in other battery sub systems, we do not see a chance to integrate to system level without close partnering with a battery cell supplier. Again, the reason being the exceptional value and margin potential the cells are holding. If battery cells and the related system business are excluded, the remaining market is still holding € 35 bn in 2030. Within this market, chances are high for suppliers to benefit from electrification through component-based innovation or meaningful integration of sub-systems.
Its value structure and supply situation make battery systems a challenging environment for suppliers looking for system opportunities: Cells dominate the battery system both in terms of value, margin, and performance. In parallel, most OEMs seek to capture value creation on system integration level. As a result, suppliers should focus on providing innovation on component level for battery housing, electrics / electronics, and thermal design. For those who want to grow profitable businesses with batteries, we recommend ten first steps at the end of this study.