Bosch’s decision to abandon electric-vehicle battery manufacturing last month underscores the challenges facing players in an increasingly crowded market, say analysts.
“This is a pretty bold step by Bosch,” said Mitalee Gupta, energy storage analyst at GTM Research, after the German multinational announced plans to give up on in-house battery manufacturing.
“However,” she said, “it is important to understand that capital investments are required at both the cell and battery pack level to meet the growing battery demand from EV and stationary energy storage market.”
With established battery manufacturers pouring hundreds of millions of dollars into new gigafactories around the world, new entrants could find it hard to muscle into the market, said Gupta.
“Unless a company brings new, commercially viable chemistries or makes great strides in energy density improvements, the lithium-ion cell market will be largely dominated by Chinese and South Korean manufacturers,” she said.
Bosch had hoped to crack the market with a next-generation solid-state lithium-ion battery developed by Seeo, a U.S. startup. Bosch bought Seeo in 2015 and has now put it up for sale again. Reuters reports Seeo “already has potential buyers.”
Bosch is also pulling out of Lithium Energy and Power, a lithium-ion battery manufacturing joint venture that has soaked up around €500 million ($616 million) in investments.
Bosch estimated it would need to spend an additional €20 billion ($24 billion) to reach its target of creating 200 gigawatt-hours of manufacturing capacity a year, enough to cover a fifth of the EV and stationary storage markets by 2030.
The company made it clear it was not pulling out of batteries altogether, though. “To be a significant player in electric mobility, we don’t need to produce the cells by ourselves,” Rolf Bulander, head of mobility solutions, told Reuters.
Nevertheless, the newswire called the move “a blow to European politicians and car manufacturers who have called for companies to band together to create a regional battery cell producer to compete with Asian players such as Samsung and Panasonic.”
Gupta said it made sense to leave battery manufacturing to these eastern giants. “It is not necessary for a company to manufacture its own cells to gain prominence in the battery market,” she said. “Several companies have adopted this strategy, where it is much more viable for them to procure cells and use their niche technology to package and improve performance of batteries at the pack level.”
Bosch is just the latest in a growing number of companies, from startups to industrial giants, to struggle with battery manufacturing.
In January, for example, Chicago grid equipment company S&C Electric announced it is winding down its battery manufacturing line of business -- albeit the company only made the inverters needed to connect energy storage to the grid, and not the batteries themselves -- in the face of growing competition.
"We have other people in the marketplace who are taking single-use-type energy storage systems and just throwing them at the market for some incredible prices," David Chiesa, senior director for business development at S&C, told GTM.
GE, meanwhile, was forced to abandon battery manufacturing after the aspirations for its Durathon brand did not pan out. The company is still very much in the energy storage business, but no longer makes its own batteries.
The problem for these hopefuls, as with larger brands, is that Asian lithium-ion battery manufacturing capacity is now so far ahead it is hard for anyone else to catch up.
Benchmark Mineral Intelligence predicts China will dominate lithium-ion battery manufacturing for the foreseeable future, with 108 gigawatt-hours of capacity, or 62 percent of total annual production, by 2020.
South Korea will account for another 13 percent, giving the two countries control over three-quarters of annual battery production.
Bosch clearly decided it wasn’t worth betting against these odds, even with a potential ace like Seeo up its sleeve.
“Though these batteries possess several promising attributes in terms of safety and improved energy density, the biggest challenge -- achieving cost parity with today's lithium-ion batteries -- still remains,” Gupta noted.