McKinsey: Surging Battery Demand Opens Up New Opportunities For European Machinery And Equipment Makers

Despite the economic and supply disruptions caused by the COVID-19 crisis, the recent breakthrough in electric vehicles will generate unprecedented demand for electric vehicles. As the demand for electric vehicles increases, the demand for batteries will increase substantially. To meet local demand, battery manufacturing around the world is ramping up production. To serve the European EV manufacturing industry, established battery companies and emerging startups have announced plans to have a combined annual capacity of 965GWh in Europe by 2030, accounting for 28% of the approximately 3,500GWh global capacity in 2030, a 20-fold increase from 2020.
 

To meet growing demand, around 30 new battery manufacturing plants will be required across Europe, requiring capital expenditures of up to 100 billion euros (pictured below). About 60% of the total investment will go to battery manufacturing equipment. This means that the annual business opportunities of the European manufacturing equipment industry will reach 5 billion to 7 billion euros by 2025, and the annual business opportunities between 2025 and 2030 will reach 7 billion to 9 billion euros.

Only a handful of companies in Europe specialize in battery manufacturing equipment for electrode fabrication, battery assembly, and battery finishing; the majority are in China, Japan, and South Korea (pictured below). However, these existing battery manufacturing suppliers are operating at more than 95% of their capacity, leaving little room to increase production. Also, they may be prioritizing orders from established customers (mainly leading existing battery makers) over new entrants to the European and U.S. markets. As a result, European battery manufacturers and EV OEMs entering the space could face equipment supply bottlenecks that put their planned production launches at risk.

Considering the geographical proximity of European equipment manufacturers, it is beneficial to install, upgrade, and support equipment by becoming a key supplier to established battery manufacturers and newly established battery manufacturers expanding into Europe and the United States. European equipment manufacturers have the opportunity to receive a fair share of operating income. Equipment manufacturers that already sell the equipment they need can expand capacity to meet surging demand and reach existing and new customers. At the same time, manufacturers that do not currently sell the equipment needed to produce Lithium SuperPack Batteries can enter this market using existing machinery and equipment expertise in similar processes.