Leaders Emerging from the Pack in the Advanced Automotive Battery Market
If you attended the Advanced Automotive Battery Conference (AABC) in Orlando, Fla. last week, you probably noticed consistent theme—the global leaders in the advanced automotive battery market are starting to separate from the pack.
While various presentations projecting market size differed slightly in their conclusions, the common thinking is that five or six suppliers are starting to emerge as having the lion’s share of the advanced battery market for transportation. Although the rankings on projected market share vary depending on which analyst you speak with, those companies emerging as the industry leaders are LG Chem, AESC, Panasonic/Sanyo, SB LiMotive, GS Yuasa and A123 Systems.
For example, in his talk, AABC chair Dr. Menahem Anderman showed a chart which projects sales for the top battery companies over the next few years, which shows a clear a separation of the leaders from everyone else.
Similarly, Pike Research recently issued a Pulse Report on Electric Vehicle Batteries which assesses both the strategy and execution of 10 leading automotive lithium ion battery suppliers.
Pike rated battery suppliers on the following criteria: vision; go-to-market strategy; partners; product strategy and roadmap; geographic reach; market share; sales and marketing; product quality; and reliability, product portfolio and staying power. Pike's findings also indicate a separation of the leaders from everyone else.
One of the commonalities in these and other findings is that the majority of the leaders are independent suppliers that are not captive to a single automaker. Some battery suppliers and automotive OEMs believe the best approach is to create a vertically-integrated automaker, as exemplified by the Japanese keiretsu groups. Here, the automaker owns or has deep linkages to major suppliers, which guarantees volume and ensures security of supply. However, it may result in a company that is less open to new technologies and innovation.
However, most of the industry leaders are stand-alone, “best-of-breed” battery suppliers. While requiring suppliers to compete for every program can be resource-intensive and somewhat time consuming, it offers the significant advantage that each supplier has a strong incentive to improve and innovate in order to continue winning business.
This becomes increasingly important considering the variety of electrification applications. There is much more to the industry than pure battery electric vehicles and the advanced automotive battery suppliers that have recognized this are best-positioned to move forward. Automakers are building micro-hybrids and mild hybrids in addition to full hybrids, plug-in electric hybrids and pure electric vehicles, each of which require some level of customization in battery design and electronics architecture.
Best-of-breed battery makers are able to develop products to serve each of these markets. The risk, of course, is that there is no built-in demand, so if these suppliers do not win enough business, they may not achieve the economies of scale required to reduce cost and remain competitive in the long term. This results in a natural separation of the field, which is projected in these and other studies, and is starting to play out in the marketplace.
The top tier suppliers win business and build volume, which in turn helps reduce cost and win additional business. Companies that do not have that commercial success progressively get weaker and weaker until they eventually abandon the market. By going with the “best in breed” supplier, the automaker is able to leverage the free market, minimizing its own risk of picking the wrong technology path. If the battery supplier has a compelling offering, they will win other business and will be a stronger partner. If they don’t, the automaker can move on to the suppliers that are winning.
So while the project leaders in this industry tend to be independent battery suppliers that have significant efforts in the area of mild and micro hybrids (in addition to EVs, PHEVs and HEVs), the question becomes, is this analysis based on research that can accurately project the market?
To attempt to help answer that question, our next blog entry dissect another market forecast for the automotive lithium ion battery industry, this one conducted by strategy consultancy Roland Berger. Its findings are similar to those offered by Anderman and Pike Research, but we think the methodology Roland Berger used may be the best yet in terms of accurately predicting this market.