Battery is still key to success of EVs – UBS teardown analysis broadens further

We are back to the races in our latest battery teardown analysis with industry experts P3 Automotive and UBS Evidence Lab, and have now covered a full stable of 7 cells, including all major manufacturers. The battery represents 25-40% of the total cost of an electric car today, which makes it the most expensive component. Reducing battery cost and improving performance is the most crucial driver to

  1. make electric cars a mass-market technology and
  2. win in a competitive battery and auto OEM landscape.

The implications are far-reaching affecting sectors including commodities, mining, chemicals and industrial equipment amongst others. 12 analysts collaborated on this project covering 5 sub-sectors across the value chain. We conclude that most players are in striking distance of battery cost parity with a gasoline powertrain at $100/kWh in 2021-22.

EVs approaching total cost parity finish line

Higher cell energy density and OEM insourcing-driven savings at the pack level for next generation battery systems leads to $20/kWh estimate downshift to $100/kWh. This is equivalent to $1,000 – $1,500 savings per car. Total cost gap with conventional cars is merely $1.9k in 2022, and we expect it to fully close by 2024. EU / Chinaled growth should drive global EV penetration to ~17% by 2025 and ~40% by 2030.

Sector findings: “all-in” strategy for EVs and new materials for batteries

The current nickel based (NCM/A) technology path is hitting a technical wall creating urgency for more differentiated battery materials and new upstream metals. Lithium, diversified chemicals, battery materials and incumbent cell makers look best positioned for an uncertain technology transition into 2025. There are two key implications for global autos:

  1. With rapidly accelerating EV penetration, an “all-in” EV strategy is the only viable approach to stay competitive and
  2. the cost lead in battery cells is minor by now and will depend on its new proprietary cell design in the future.

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