‘High-flying battery makers have much to win, lose’

22 June, 2021 12:00 AM printer

NEW YORK: S&P Global Ratings said on Monday the world’s biggest battery producers globally face substantial upside and downside risks to ratings.

While their growth opportunities are significant, they will need to navigate fast-moving technology, heavy expenditure, geopolitical forces shaping trade lines and environmental strains, it said, report agencies.

The demand for batteries that power light electric vehicles (including battery electric vehicles and plug-in hybrids) may grow as much as eight-fold by 2025 from 139 gigawatt hours in 2020.

Many countries are encouraging battery production to foster their own domestic electric vehicle industry.

“The battery sector has entered an extremely dynamic phase. Firms face substantial growth opportunities as electric vehicles rapidly replace legacy autos,” said S & P Global Ratings credit analyst Stephen Chan.

“This will require heavy upfront investment in a battery standard that may be quickly eclipsed by superior technology. There are many moving pieces that may contribute to sharp ratings moves, up or down.”

Although Europe and the United States are aggressively building battery capacity, supply will likely undershoot demand. Regulatory inducements and government subsidies made Europe the fastest-growing electric vehicle market in 2020.

In the United States, the Biden administration has proposed tax incentives and new infrastructure (such as charging stations) that may increase the ratio of EVs to new auto sales to about 10 per cent, by 2025.

“The battery supply chains in the US and Europe are underdeveloped, and will need years to catch up to players such as China,” said Chan.

Global carmakers are also leveraging on their partnerships with Korean and Japanese battery suppliers which have larger capacity available in Europe and the United States to secure battery supply in their home countries.