What is the Best Approach to Determine the Leaders in the Advanced Automotive Battery Market?
As we discussed in a post earlier this week, a common opinion at the Advanced Automotive Battery Conference (AABC)— and from many other industry analyst assessments—was that the global leaders in the advanced automotive battery market are starting to separate from the pack.
We generally agree that there is likely to be a shakeout over the next few years, and, as with many burgeoning industries, there should be a handful of suppliers that retain a bulk of the market share. But which of the many studies and forecasts of this market are most accurate? How can we decide which studies are especially credible and which ones need some work?
When trying to determine which suppliers will emerge as the industry leaders, some prognosticators base their forecasts only on publicly announced supply contracts. While this may be an accurate assessment of market share in the moment, it does not paint the entire picture. Over the next few years, the number of EVs, hybrids and PHEVs being built is expected to increase exponentially. For instance, our analysis shows that in the 2010 model year, 27 automakers globally developed 50 different electrified models. For the 2012 model year, those figures should grow to about 36 automakers and more than 110 different models. And into 2013 and beyond, we expect these numbers to continue increasing.
Also important to the discussion are the factors automakers consider when selecting battery suppliers. The performance, safety, longevity and durability of the technology are critical, of course, but this is only part of the equation. Automakers tend to award contracts to companies that also have advanced manufacturing capabilities as well as financial stability, which indicates the ability to serve as a long-term supplier capable of fulfilling high-volume orders over an extended period of time.
Taking these factors into consideration, strategy consultancy Roland Berger conducted its own study about projected market share in the lithium ion battery industry, which we feel uses one of the best approaches to reach its conclusions. As highlighted in the chart below, Roland Berger also determined that in 2015, more than two-thirds of the global market share for advanced automotive lithium ion batteries will be controlled by just five suppliers.
But unlike previous market share predictions, the methodology used by Roland Berger took into account all of the vehicle models projected to use lithium ion batteries in 2015 based on sales estimates from a globally respected automotive forecaster. The likely battery supplier for each program was then derived from existing contracts, manufacturing capabilities, overall company financial strength and proprietary data obtained from both battery suppliers and automakers. The result is a projection that we believe more accurately reflects what the market will look like in 2015 and beyond.
(It is worth noting that while Roland Berger projects AESC, the battery supplier to both Nissan and Renault, as the market leader in 2015, one of the biggest uncertainties in Roland Berger’s models is the sales volumes for these OEMs. This is likely part of the reason why the recently issued Pike Research Pulse Report on Electric Vehicle Batteries, which assesses both the strategy and execution of 10 leading automotive lithium ion battery suppliers, ranked AESC lower on its strategy. This supports one of the commonalities in many market studies that the majority of the leaders will be independent suppliers that are not captive to a single automaker.)
Ultimately only time will tell which battery companies will emerge as the industry leaders, but there are key predictors available that can help formulate an accurate assessment that should closely resemble the market landscape. Not every study uses the most important factors, however, so it is important to thoroughly evaluate the metrics and methodologies used to obtain the results before taking them as a certainty. This will allow for a more educated, informed decision-making process that cuts through the headline-grabbing F.U.D. (fear, uncertainty and doubt) created by otherwise reputable news organizations that are reportedly publishing stories riddled with misleading information and factual inaccuracies.