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After eight years, Macro Polo has ceased operations as the Paulson Institute will focus its independent research on supporting its programs as it continues to diversify its scope.

We appreciate the community that has grown around Macro Polo and the fruitful engagement we’ve had with our legion of smart and sharp audience. You’ve pushed us to deliver even more original work and innovative products. Our body of work speaks for itself, and we hope it will have a long shelf life – that was the intent from MP’s inception.

MP’s website is now archived and no new work will be published henceforth on this site. Please visit www.paulsoninstitute.org for future research and policy work on a range of global issues.

Thank you all for the support over the years, it has been a privilege to have had a home at the Paulson Institute and to have built it the way we did.

- Team Macro Polo

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Key Takeaways

  1. The li-ion battery industry is expected to see major growth over the coming decades, driven by continued demand for consumer electronics, emerging possibilities for energy storage, and especially the eventual widespread adoption of EVs. As technology advances, production expands, and prices fall, li-ion batteries will be central to the transformation of global transportation.
  2. Industry consensus holds that when the cost of li-ion batteries falls below a $100/kWh threshold—which is forecast to be reached in the next decade—EVs will become cost-competitive with ICEs, as batteries represent a significant component of EV costs. Commercial adoption should begin to take off at this point.
  3. As the li-ion battery rises in importance, so too will the raw materials that go into it. Present concerns over lithium supply may be overblown as reserves remain untapped and production capacity can be ramped up, including in the United States. But the concentration of cobalt reserves in a single, unstable country—the Democratic Republic of Congo—presents supply chain risks. This will likely prompt an accelerated shift toward li-ion chemistries that significantly reduce cobalt content.
  4. Other battery inputs, such as nickel and manganese, do not face supply bottlenecks and are dispersed in stable parts of the world. Graphite, too, is abundant, though China is a leading supplier and consumer of it and influences its price. If advances in silicon-based anode material become commercially successful, China could also benefit as it produces abundant silicon.
  5. China is now the world’s largest producer by volume in midstream li-ion battery components such as cathodes, anodes, and electrolytes. In the downstream, too, battery cell production is increasingly shifting to China, where domestic industry is dominated by CATL and BYD.
  6. China’s dominance in the li-ion battery supply chain is not yet assured, however, as Japan and South Korea remain highly competitive in various segments of the battery supply chain, including downstream assembly and midstream components. These dynamics imply that, without significant investment or policy incentives elsewhere, the li-ion battery supply chain will agglomerate in East Asia in the foreseeable future.
  7. The American li-ion battery industry depends largely on Tesla’s prospects. But production tends to migrate toward end demand. If China continues to support its EV industry and provide subsidies to a much greater extent than America does, then more global battery cell production will shift to China, further reinforcing East Asia’s dominant position in the industry.
  8. State subsidies and a favorable regulatory environment have helped Chinese battery producers like CATL narrow the gap with global leaders like Panasonic. However, Chinese manufacturers still lag behind on key metrics like cost and energy density. When a subsidy for Chinese consumers who purchase EVs with domestic batteries ends in 2020, Chinese producers will likely face greater challenges from foreign battery makers, presenting potential opportunities for investors.

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