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Jul 26, 2017,  by Allianz Partners Business Insights

Electric cars: Will there be enough batteries for the world’s car manufacturers?

The spectre of a lack of batteries to equip all of the various models of hybrid and electric vehicles that are set to be launched in the coming years is looming over the world market. Estimations vary in their levels of concern, but whatever happens, manufacturers will have to ensure somehow that they have sufficient supplies in the near future.

 

What would happen if the batteries required to power eco-friendly electric cars and driverless vehicles suddenly ran out? With the protection of the environment playing an ever-greater role in decision-making when it comes to purchasing, the boom in sales of this type of car has seen manufacturers step up production, with plans to introduce greater numbers of new types of models onto the market.

This in turn will lead to increased demand for batteries, which will outstrip the capacity of current production units in years to come. No less than 172 billion euros in investment will be required to build 40 new factories around the world to meet this greater demand for batteries.

 

Tesla invests 4.3 billion euros in production of 500,000 batteries

 

This may seem like a rather exact figure, but there is method behind the calculation, explains French daily Le Parisien. US electric car specialist Tesla is building a "Gigafactory", set to open in 2020, at a cost of some 4.3 billion euros and with a battery production capacity of 500,000.

According to Ulrich Eichhorn, head of research and development for the Volkswagen group, 40 super-factories along the lines of Tesla’s new project will be required over the next eight years to meet worldwide battery demand. And this all adds up to 172 billion euros that players on the market will have to invest between them if they are to avoid the kind of shortage that would have a dramatic effect on business.

For this scenario to become a reality, however, the proportion of electric cars on the world market would have to break through the 20% barrier, and while manufacturers have not yet given any precise indications of their plans in terms of battery production, their intentions could not be clearer when it comes to the imminent launch of new models of non-polluting vehicles.

PSA-Peugeot Citroën, for example, are set to unveil seven hybrid and four electric vehicles, while Volkswagen is planning a range of around 30 eco-friendly models, with targeted sales of three million vehicles. Swedish manufacturer Volvo expect to market a million electric cars, and overall predictions are of 100 million vehicles fitted with electric batteries on the roads by 2025.

 

Estimates vary from one expert to another

 

Or it could be less… a lot less. Some experts in the sector have a more sober vision of the development of this type of car over the coming years. PSA-Peugeot Citroën believe that electric vehicles will account for 4%–6% of all sales by 2025 in Asia and Europe, which should be among the most profitable markets.

The Organization of Petroleum Exporting Countries (OPEC) is being even more cautious, estimating that only 1% of all cars sold in 2040 will be electric, which in turn will lead to a lower demand for batteries than expected.

 

France lagging behind in battery production?

 

Whatever the future realities of the market, manufacturers realise that it is critical for them to have a reliable supply of batteries – in terms of quality, quantity and cost.

French car makers will have to get their act together if they are not to find themselves cut adrift by companies from abroad, who already have a competitive advantage. The French Institute of International Relations (IFRI) points out that Asian and US manufacturers already have part of their production costs financed by outside investment, while German giant Daimler is set to plough a billion euros into its battery supply chain.

 

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