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Electric Car Battery Glut Looms on the Horizon

As the solar panel industry dusts itself off from a long-anticipated glut in 2009, another green technology — large format lithium-ion batteries designed for transportation and grid storage applications — could be edging toward overcapacity.

According to market forecasts from Lux Research, global sales for these batteries will reach about $3.7 billion (6.3 gigawatt-hours) in 2015. Production capacity in that year, however, could be nearly triple that amount, with companies equipped with capacity to supply 18.2 gigawatt-hours, for some $10.7 billion if they were all sold. Lux senior analyst Jacob Grose told me in an email, “We are definitely predicting a Li-ion glut coming.”

Given the number of companies planning to break ground this year on new lithium-ion battery manufacturing facilities (see our map of the U.S. green car battery buildout), or expand existing facilities, John Gartner of Pike Research (which pegs the global lithium-ion battery market for transportation applications alone at $7.9 billion and 16.9 gigawatt-hours in 2015) anticipates we could start to see excess capacity starting in 2012. “How much of this capacity is actually used, that’s an open question,” he said, but supply could outpace demand by 2012 as well.

“Battery manufacturers are preparing for a best case scenario,” said Gartner, noting that quite a bit of uncertainty remains. “The financing isn’t all in place. They probably won’t live up to some of their own expectations, mainly in the U.S.,” as opposed to Japan and South Korea’s battery giants that already have commercial-scale manufacturing operations.

Not everyone anticipates a looming battery glut. Oliver Hazimeh of the consulting group PRTM said today that while his firm does not expect “any significant overcapacities in the next few years” for the sector as a whole, individual suppliers may find themselves with unused production lines as automakers search for their groove in the EV business. Original equipment manufacturers, or OEMs, said Hazimeh, may “re-source” or change their battery supply agreements.

For young battery companies in the U.S., Gartner commented in an interview today that excess capacity could present a major hurdle in the coming years. A123Systems (s AONE) and other U.S. battery developers planning to build out new plants in the next few years (some of them with ambitious production goals tied to government funding), “are not sitting on a lot of cash,” noted Gartner. “Once they establish that manufacturing, they need to be instantly generating revenue.”

“Everyone will have their own estimates of future market demand and production capacity,” said Maurice Gunderson of venture capital firm CMEA Ventures. So while declining to offer specific projections, Gunderson told us this week he thinks it’s “likely that the current rate at which battery production capacity is being built will exceed the growth of demand, and so temporary overcapacity will result at some point in the future.”

But you know what? That’s not such a bad thing, he said. “Production capacity growth will slow, and demand will have a chance to catch up.”

It’s a pattern Silicon Valley has seen before. “We see this in many fast-growing industries,” said Gunderson, offering solar, disk drives and semiconductors as examples. “It’s not unique to energy, nor is it a fatal flaw in a new industry. In fact, it’s a natural consequence when supply and demand are both growing very fast.”

Asked if this trend is informing CMEA’s investment strategies at all, Gunderson said no, for the time being, “because we believe an oversupply condition is several years away.”

Photo credit General Motors

Related reports on GigaOM Pro (sub. req’d):How EV Battery Startups Can Cross the Valley of Death,” “How To Break Into the Energy Storage Market,” and “Better Battery Life Motivates Mobile Chipmakers

15 Responses to “Electric Car Battery Glut Looms on the Horizon”

  1. grupa jurgena

    Those who put their money on batteries. This project Leonardo da Vinci is the winner of this will be a shock when we declare Leonard. This will be the end of the battery

  2. norinradd

    “Notable is that a particular oxide of vanadium is hugely toxic, the msds indicates something like lethal. So technologies which use vanadium in batteries must prevent formation of or any human contact EVER with materials which might even contain traces of Vanadium Pentoxide….”

    For a slightly more balanced view:

    You will notice that the exposure risk is from vanadium pentoxide ‘dust’ and seeing as it’s a flow battery (ie in solution) dust is not an issue. It is also my understanding that the electrolyte reservoirs are air-tight.

    For fun, why not compare the health effects of gasoline exposure (some links below) to vanadium pentoxide dust. Given my druthers I’ll take the over-exposure to vanadium pentoxide dust any day of the week. Its the difference between milligram’s for vanadium and parts per million for gasoline.

    Finally, should something go wrong the EPA is only interested in hearing about it if you happen to dump 1000 lbs of vanadium into the environment.

    Yup. Really toxic. Absolutely deadly. Be afraid, be very afraid.

    • Truth in Science

      “Finally, should something go wrong the EPA is only interested in hearing about it if you happen to dump 1000 lbs of vanadium into the environment.”

      Perhaps you don’t know much about the EPA… but their threshold response is in no way related to the danger a spill poses to individuals. It’s completely improper to use that as a measure.

      As for your “dust” comment… what happens to a vanadium containing liquid that leaks out… it hits the ground… the liquid dries… what is left behind… vanadium powder… ie “dust”.

      As for your OSHA reference… it’s clear that you do not know much about OSHA, for their modus operandi is to try to make workers feel safe about exposures to dangerous compounds rather than actually protect the workers based on sound scientific principles. A prime example is their calculations for safe levels of exposure to radioactive substances… using completely irrelevant calculation methods that are designed to make you feel better rather than keep you safe.

      As to your comparison with gasoline… 1st, may I suggest you read your own reference… OSHA (once again, not interested in keeping you safe) set a safe exposure well below the “milligrams” you mentioned… OSHA @ 0.5 milligrams… and NIST puts a safe level at 0.05 mg… which translates into 50 micrograms (15min exposure)… clearly you do not have the slightest idea how tiny these quantities are… 50 micrograms… well let’s call that about 1 drop… ou’re in your garage… your battery takes damage on the road… a few drops hit the concrete… your garage is now toxic… or batteries are disposed improperly… it gets into the water table…

      and yet another point where you are incorrect…
      the danger is not just with vanadium dust… it is with “all vanadium compounds” (except when part of solid metal)… once again I suggest you actually read your reference.

      In summary, everything you have said is complete rubbish.
      If you call that “balanced” then I would suggest that you have been watching too much fox news.

  3. Charlie,

    Vanadium is interesting, it has lower solid state ion mobility than Lithium ( mobility being a component / one metric in battery technology esp solid state ).

    Notable is that a particular oxide of vanadium is hugely toxic, the msds indicates something like lethal. So technologies which use vanadium in batteries must prevent formation of or any human contact EVER with materials which might even contain traces of Vanadium ?Pentoxide….

    I suppose there is (sic) a silver lining there somewhere?

    in reality a bit of sensible caution is worthwhile.

  4. Charlie Goodman

    Another “threat” to lithium batteries is vanadium….

    Did you know that one kind of battery can be refilled with a charge in much the same way as a gas tank?

    Scientists have made the first renewable fuel cell that can store more energy than petrol. VANADIUM of course! :

    Vanadium Redox Batteries will enable the Green Energy Smart Grid of our kids’ future:

    The Vanadium Battery: The Ultimate Energy Storage Solution –

    Vanadium – The element that could change the world: Little Known Element Vanadium Making Headway On Energy Scene

  5. How DO these consultant idiots stay in business? Last months it was under supply, this week it’s over supply. ALL these clowns seem to predict either way EV sales will tank, forget the pent up demand and the laws of economics!

    Economics 101, what happens to prices in an over supplied market? They drop. Yet these idiots trotting out -study after study- always cite high battery prices as their reason for predicting EV sales going no-where! HELLO!!!

    Let me spell it out for these idiots. As more battery manufacturing capacity comes on line, they will start to come close to meeting pent up demand for EVs. As yet more comes on line prices will start to drop rapidly which will stimulate even more demand. Believe me, once the general public discover EVs are 1/10th the running cost of an ICE, demand for EVs won’t peter out until at least a Billion units have been sold.

    Who would you believe actually knows the market, some research analyst trying to short stock or the guys actually putting their dollars on the table and building capacity?