Are Electric Vehicles on the Cusp of Mass Adoption in APAC?
With governments around the world seeking to reduce carbon emissions, electric vehicles (EVs) are seeing increased adoption. While internal combustion engines will still be with us for the foreseeable future, a sea change is likely coming when EVs will dominate the roadways. To learn about the current state of EVs in the Asia Pacific region, GLG hosted a panel of industry leaders formerly with LG Chem Power, CATL, and Volkswagen to share their perspective on the emerging EV and battery trends. The questions below are a selection from the broader conversation.
What is your outlook for EV growth over the next few years?
Dr. Patil: By next year, roughly 12% of new vehicles are expected to have some level of electrification. Battery and plug-in hybrids — collectively referred to as EVs — are getting close to the 5 million mark, with maybe 70% battery electric vehicles (BEV). Growth seen with plug-in hybrid electric vehicle (PHEV) technology is a result of a growing demand to lower the carbon footprint and enhance the power or acceleration of the vehicles. A significant increase in micro-hybrids is also anticipated, driven by CO2 regulation, particularly in Europe.
We are going to be focusing more on passenger and light truck EVs, whose numbers are expected to grow to a global penetration of maybe close to 15% by 2025, with China being close to 20% and Europe maybe overtaking China, getting to 25%. One of the key reasons is the availability of models. By the end of this year, we expect to see more than 200 EV models available to customers, and that count will rise to about 500 by 2022.
How will this growth affect the lithium-ion battery market?
Dr. Patil: The passenger or light vehicle segment was at about 90 gigawatt hours last year. That’s expected to grow to 700 gigawatt hours by 2025. And there are several factors driving this growth that are not going to change. Of course, one is regulation and subsidies. Europe is decidedly moving away from diesel. China has a very strong commitment and desire to dominate in this space, and one of the key enablers, the battery price, is on track to get to $100 a kilowatt hour. In fact, some are claiming that they’ve already reached those kinds of levels.
In your view, why is China positioned to be a role model in new energy incentives and taxation policies?
Galyen: Within the next 10 years, China expects to get 40% to 50% of all the vehicles on its roads electrified. Subsidy reduction is not linear, but it does provide a subsidy incentive over the next three years. Key points of the incentive subsidies are based on energy density, which defines a subsidy coefficient to apply against the subsidy base. The three taxes involved are the consumption tax, the purchase tax, and the vehicle and vessel tax.
Suffice it to say that the rest of the world is now trying to catch up on the regulatory and policy part of it. On the infrastructure side, charging is quite important. But the recovery and recycling of these expensive battery systems is also very important as a part of the circular economy.
Can you share with us what your Five Golden Rules of electrification are?
Galyen: This is the right order: safety, performance, life, cost, and environmental. If you follow those five golden rules of electrification, you will be far more successful than not.
From the OEM perspective, how would changes in the battery and EV market alter your long-term strategy approach?
Roettgen: Original equipment manufacturers (OEM) in the U.S. and Europe are trying to build up know-how in this field, which is totally new to them and not comparable to the know-how they had from [Volkswagen’s] production. There will be many more partnerships among different suppliers to keep key aspects of the automotive value chain locally, doing that in different joint ventures, corporations, and, of course, OEM and university corporations as well. The long-term aspiration of any OEM would be to own battery manufacturing and to get the key value parts back integrated. But there are huge challenges to do that.
In China, the strategy is different. A few years ago, China aggressively promoted local manufacturers and gave them a chance to rise against the Asian suppliers that were technologically ahead at that time. That was extremely successful. The OEM ambition is to own at least a share of the margin. So that’s why you see a lot of joint ventures and equity investments in the value chain supply.
Where are we at with the reuse and disposal of Li-ion batteries? How is recycling done?
Galyen: It’s a matter of the amount of batteries that are coming out of the marketplace that can be recycled to serve as the fuel for the recycling endeavor. You need enough spent batteries for it to become a financially viable operation.
Dr. Patil: I expect commercial-scale recycling to be in place by about 2023.The reuse is something that, ironically enough, is partly challenged by the way the costs are coming down for the new battery, because they’re dropped by a factor of two by the time it comes to end of life.
Roettgen: The question of recycling points to the critical question of the residual value of EVs at the end of their life. It’s still a little bit unclear how that exactly will play out.
Dr. Patil: One final point on that. There is also going to be legislation globally. It’s already there in Europe, where the OEMs will own the batteries at the end of the vehicle life. In fact, the new business model is emerging, which is offering battery as a service, where essentially a third party of the OEM or the battery manufacturer can own the batteries and capitalize on all the residual value, addressing one of the major anxieties on the customer side.
Who is likely to dominate in the charging space?
Galyen: Globally, there will be a split between conductive charging and wireless power transfer charging. There is an enormous amount of work being put into wireless power transfer charging for a fundamental reason. It takes away the burden of plugging in your electric vehicle.
Dr. Patil: To add to that, batteries will actually play a key role in the charging infrastructure as well, because part of the challenge is lowering your rate, as well as a type of connection you need from the grid. Quite a bit of battery storage is going into the charging facilities that can lower your rate, and then still allow you to meet fast-charge requirements.
Can we expect battery formats to converge and standardize in the future?
Galyen: It is a little bit bewildering in the investment world. Why wouldn’t there be standardization on cell sizes? Because there has not been so far.
Roettgen: Why OEMs are not incentivized to standardize is because they’re trying to differentiate or keep the opportunity to differentiate. The power train used to be a key differentiator between OEMs. That is gone. That’s definitely the other force driving that apart.
Dr. Patil: Technology is also still evolving, and you would not want to prematurely standardize.
What to watch next?
Galyen: Nobody has said anything about energy storage systems for the grid. Nobody has said anything about the big marine applications or the heavy-duty industry, or the heavy-duty truck industry. There are lots of new markets that are bubbling up and further enabling car and bus and truck manufacturers, and marina and grid applications are going to be rather large. Battery manufacturers will make their margins on other markets that are ancillary to automotive as well.
Roetten: There is a new battlefield coming up on the software side. Autonomous driving is one of the functions coming up. But as well, the automotive operating system is where Chinese companies are very successful. There might be a significant shift in industrial politics toward that.
About Robert Galyen:
Robert Galyen recently retired from his position as Chief Technical Officer of the world’s largest battery company, Contemporary Amperex Technology Company Ltd. (CATL), from December 2012 to November 2019. During his seven-year tenure, Galyen helped grow the company to over 25,000 employees and secure its position as the world’s largest manufacturer of lithium-ion batteries. In 2015, China awarded Galyen with the prestigious “Friendship Award” and bestowed upon him in 2014 the title of “National Distinguished Expert.” In professional organizations, he has held the Chairmanship of the SAEvInternational Battery Standards Steering Committee for nine years (with 25committees reporting to him) and is Chairman Emeritus and CTO for NAATBatt International. He also serves on the board of the Lugar Center for Renewable Energy. at Indiana University. He holds a master’s degree in chemistry and has 43 years of experience in battery technology.
About Prabhakar Patil:
Dr. Prabhakar Patil has been an independent consultant since February 2017. His expertise includes electric vehicles, Li-ion batteries, and associated technologies. He was the Chief Executive Officer of LG Chem Power Inc. (LGCPI) until September 2015 and has served as Senior Advisor from October 2015 until January 2017. LGCPI is the North American subsidiary of LG Chem Ltd., one of the world’s largest producers of lithium-ion batteries for automotive (hybrid and electric vehicles) and nonautomotive (commercial, military, conversion, and portable equipment) applications. LGCPI is a total-solution provider with turnkey solutions for HEV, PHEV, and EV applications and specializes in cells, modules, packs, and battery management systems. LG Chem and LGCPI supply General Motors, Ford, Volkswagen, Audi, Daimler, Volvo, Hyundai, Renault, and other car manufacturers with products in production plug-in vehicles. Prabhakar is also an Advisory Board Member of Cobalt 27 since June 2017. Previously, Dr Patil spent 27 years at the Ford Motor Company until 2005. From 1998 to 2003 he was the Chief Engineer for the Hybrid Escape Vehicle Platform, Ford’s first production hybrid electric vehicle. Dr. Patil holds a bachelor’s degree from IIT Bombay and a master of science in engineering and a PhD in engineering from the University of Michigan. He has 18 patents, published 27 articles, and received the Henry Ford Technology Award in 1991 for his work in electric vehicle power train development. He was elected a Fellow by the Society of Automotive Engineers (SAE) in 2007. He is currently an Advisory Board Member with Cobalt 27, Ashok Leyland, Capital Corp., Addionics, Beltech, and a number of small, privately held start-ups.
About Clemens Roettgen:
Clemens Roettgen is currently working as a free advisor and consultant. He has previously been employed at Volkswagen Group China, holding the title of Director of Corporate Strategy. In this role, he led group strategy, strategy steering, and controlling in China. He was also responsible for the transformation of the business model for continued success in changing political and strategic landscapes. He successfully set up a new business division for export with greater than EUR 100 million in annual revenue. From June 2016 to August 2016, Clemens served as GM, Sales China, ASEAN, Taiwan, and Hong Kong from Volkswagen’s Germany offices. In this role, he was responsible for sales in the China region and volume planning/product planning departments for China and ASEAN. From September 2015 to May 2016, he served as the Head of Volume Planning, Sales China, ASEAN, Taiwan, Hong Kong for the firm. He previously spent several years in increasingly more senior roles focused on market steering and coordinating sales teams for the region.
This article is adapted from the August 4, 2020, Remote Convene “Electric Vehicles: On the Cusp of Mass Adoption?” If you would like to speak with Dr. Patil, Mr. Roettgen, or Mr. Galyen, or any of our more than 700,000 experts, contact us.