Since researchers and automotive manufacturers first began playing around with the idea of electric vehicles, the issue has always been viability of the technology. Can these vehicles be made powerful, sustainable and cheap enough for the average consumer?
The answer is quickly becoming yes, thanks in part to advances in lithium-ion battery technology.
The main benefits of lithium-ion (or li-ion) batteries are their high energy density, low maintenance, lightweight and rechargeable properties.
It’s for these reasons that li-ion batteries are making waves in the transportation sector. In terms of revenue, the global li-ion battery market in the transport sector was valued at $4.09 billion in 2014, and is likely to reach $10.76 billion by 2019, growing at a CAGR of 21.3%.
Technavio has put together a detailed analysis of the market, divided by two major segmentations: Vehicle type and geography.
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Li-ion batteries in transportation by vehicle type
Battery electric vehicles (BEVs)
Battery electric vehicles (BEVs) are a force to be reckoned with, dominating the market with a 66% share. In terms of revenue, the BEV segment was valued at $2.2 billion in 2014, and is expected to reach $5.84 billion by 2019, growing at a CAGR of 16%.
These strong growth prospects are mostly due to pressure to curb carbon emissions via the adoption of electric vehicles. Better charging infrastructure, especially in Asia and Europe, is making these vehicles more popular and more realistic for most consumers. Additionally, government incentives supporting pollution-free commuting are expected to boost sales of BEVs globally, which will have a knock-on effect on the li-ion battery market in the transportation sector.
Plug-in hybrid electric vehicles (PHEVs)
In terms of volume, the global market for li-ion batteries for PHEVs was valued at $0.88 billion in 2014, and is forecast to reach $1.89 billion by 2019, growing at a CAGR of 16.5%.
Changing consumer perceptions of PHEVs, coupled with government initiatives (such as offering economic benefits to enhance the feasibility of PHEVs) will contribute significantly to the growth of li-ion battery-operated PHEVs worldwide.
The US—not always the easiest market for electric vehicles—is the leading market for PHEV sales, however China is by far one of the fastest growing markets for PHEVs; the country registered growth of more than 800% in 2014, compared to 115% in 2013.
Hybrid electric vehicles (HEVs)
In terms of volume, the demand for li-ion batteries for HEVs was 0.37 million units in 2014, which is projected to reach 0.72 million units by 2019, growing at a CAGR of 14.3%. On the revenue side of things, the market was valued at $0.51 billion in 2014, and is forecast to reach $0.53 billion by 2019, growing at a CAGR of 0.6%.
At the moment, nickel metal hydride (Ni-MH) batteries dominate the HEV battery market. But the addition of modern dash boards that include safety alerts, route navigation, power windows, and music systems will increase demand for high-capacity batteries like lithium-ion through the projected period.
E-buses
Demand for li-ion batteries for e-buses accounted for 1,424 units in 2014, and is forecast to reach 4,769 million units by 2019, growing at a CAGR of 27.3%. In terms of revenue, the market was valued at $0.16 billion in 2014, which is projected to reach $0.43 billion by 2019, growing at a CAGR of 21.9%.
E-buses, or hybrid electric buses contain both an internal combustion engine as well as an electric motor. These hybrid buses reduce emissions by almost 75% compared with conventional fossil-fuel-based buses, owing to the ultra-low-sulfur diesel (ULSD) fuel and the particulate trap technology used in these buses. In this method, the diesel particulate or diesel exhaust is removed from the exhaust gas of the vehicle. The hybrid system also improves fuel economy.
The downside here is that hybrid-electric bus are more expensive compared to conventional fossil-fuel based busses. To help overcome this barrier, the Federal Transit Administration (FTA) in the US has implemented the Clean Fuels Grant (CFG) program, which covers 90% of the incremental cost of alternative fuel buses, including hybrid buses.
The Chinese government is also planning to increase the use of e-buses within the automotive industry by making the public sector vehicle fleet to take the lead in adopting cleaner and more sustainable technologies.
E-bikes
E-bikes are one of the newest additions to green transport. On top of being a clean mode of transport, they also help solve the issue of traffic congestion.
The li-ion battery market for e-bikes was valued at $0.34 billion in 2014, and is expected to reach $2.07 billion by 2019, growing at a CAGR of 43.4%.
Li-ion batteries are the battery of choice for e-bike manufacturers, since their high energy density and light weight are perfect for bikes.
Unsurprisingly, China (a leading global manufacturer for bicycles) dominates the market for e-bikes. There are more than 1,000 companies in China that have an e-bike manufacturing license, however, only 100 of them have production capability of more than 50,000 units.
These companies have started investing in technology, quality control, and skilled manpower in order to focus more on quality and delivering products with high performance.
There is also a lot of effort being put towards expanding the e-bike market into Europe, with top export destinations including Germany, the Netherlands, Belgium, France, and Italy.
Li-ion batteries for transportation by geography
While the APAC region will remain the market leader through the projected period, the increased popularity of green vehicles in Europe will chip away at the APAC’s market hold.
APAC
The li-ion battery market in transportation sector in APAC accounted for sales of 3.58 million units in 2014, and is likely to reach 12.73 million units by 2019, growing at a CAGR of 28.9%.
Growth in the APAC region will be primarily due to the massive market potential in both China and Japan.
Japan is the world’s third largest economy and a leading HEV manufacturer. The Japanese government is focusing on reducing the country’s dependence on petroleum products for transportation by introducing financial incentives for the manufacturers and investing in R&D, which will fuel demand for EVs.
China is also aiming to reduce dependence on petroleum products for transportation, which will help cement the country’s market’ dominance.
In 2014, a total of 74,763 EVs were sold in China, an increase of more than 300% over the previous year. Though the government has set a target to manufacture 5,00,000 green vehicles by 2015, the total number of EVs in the country is likely to be 1,13,556 by the end of 2015 and 4,64,906 by 2020.
EMEA
The EMEA region is the fastest growing market for li-ion batteries in the transportation sector. The li-ion battery market in in transportation sector in EMEA accounted for sales of 1.84 million units in 2014, and is likely to reach 9.14 million units by 2019, growing at a CAGR of 37.7%.
HEVs and PHEVs are gaining popularity in Europe as automobile manufacturers are opting for alternative energy storage system (ESS) to increase performance and efficiency of vehicles and reduce their environmental impact.
The European Union is also facilitating the switch to electric vehicles by introducing and revising various emission-related regulations, which is creating perfect conditions for market growth in the region.
The Americas
Similar to Europe, supportive government policies, consumer-driven interest to reduce CO2 emissions, volatile gas prices, and battery development are the major drivers for market growth in the US.
The US Department of Energy offered $8.5 billion to help car companies manufacture more efficient cars in 2014. It is expected that the cost of li-ion batteries will come down in the near future, which is expected to spike market growth for EVs.
Overall, the li-ion battery market in transportation sector in the Americas accounted for sales of 2.88 million units in 2014, and is likely to reach 11.12 million units by 2019, growing at a CAGR of 31.0%.
