Photo source: noyafields
High investments in development and production of Li-Ion batteries, which are necessary for large scale manufacturing of electric vehicles, represent for traditional automakers like BMW or Nissan an extraordinary opportunity to penetrate the market formerly dominated by energy companies.
In the last few years global automakers got scared about the possibility of missing out on the so called electric vehicle revolution. Tesla, with its unexpected success in the segment of luxury electric vehicles has convinced the traditional carmakers that the end of fossil fuel cars is probably closer than they had originally anticipated. This development has also been accelerated by various state subsidies and new emission limits. As a result, all global carmakers have sharply increased their spending on the development of Li-Ion batteries used in electric vehicles, which has consequently raised the price of commodities necessary for their production like lithium and cobalt.
Although the sales of electric vehicles still represent only about 1 % of the global car market, their development has, according to Reuters, already swallowed roughly 90 billions USD and this figure is still growing. To this day, the investments in the development of electric vehicles in the USA are reaching 19 billions USD while in Germany alone it’s about 52 billions USD. Volkswagen is prepared to invest 40 billions USD by 2030 in electric versions of its vehicles and competitors like Daimler, Ford or General Motors are ready to spend similar amounts of money.
These gigantic investments in battery technology needed for the large-scale production of electric vehicles are now opening doors for automakers to enter the energy storage market. Energy storage systems are getting more and more important thanks to the rising share of renewable energy in the whole energy mix. Industrial systems for energy storage are primarily used in solar and wind farms while their smaller variants are employed in residential houses. These represents a rapidly growing market in which automakers are currently much better positioned than the typical energy companies. The energy storage division of Tesla reported for Q1 2018 revenue growth of 161 % YoY. Even though headlines are filled with Tesla’s solar roof and Powerwall batteries, other more typical automakers are not staying significantly behind. At the beginning of May, the Swedish company Vattenfall announced that its wind farm in Pen y Cymoedd in Wales uses the system comprising 500 BMW i3 batteries and Nissan is now offering its xStorage batteries together with rooftop solar panels made by LG in the United Kingdom.
Big energy players like BP or Total have also increased their spending on renewable energy, but when it comes to energy storage systems they are falling far behind global automakers. The shift towards renewable energy thus represents a unique opportunity for car producers to widen their product portfolio and reduce their dependence on new-car demand.