From Gigafactory
to Giga-Business

Ever more peo­ple are choos­ing to buy elec­tric cars, also thanks to addi­tion­al incen­tives for the pur­chase of new vehi­cles. It is now time for the indus­try to act and to estab­lish bat­tery fac­to­ries rapid­ly in many parts of the world, includ­ing Europe. Known as gigafac­to­ries, they require huge lev­els of invest­ment. But how and where can they become prof­itable busi­ness­es? A team of experts from Porsche Con­sult­ing has com­pared the asso­ci­at­ed oppor­tu­ni­ties and risks. Its com­pre­hen­sive analy­sis focus­es on mod­ern bat­tery tech­nolo­gies, effi­cient pro­duc­tion process­es, and the right sites and scal­ing for sus­tain­able pro­duc­tion in Europe.

Bat­ter­ies play the same role in elec­tric cars as engines do in con­ven­tion­al cars. They are of cru­cial impor­tance for both the range and the charg­ing speed. In the year 2021 they account for up to 40 per­cent of the over­all cost of the new car. This makes elec­tric mobil­i­ty com­par­a­tive­ly expen­sive. Their size, which is direct­ly relat­ed to the range, is also an impor­tant fac­tor in the deci­sion to pur­chase an elec­tric car. Nev­er­the­less, the Euro­pean Union (EU) saw a record num­ber of newly reg­is­tered elec­tric cars in 2020, as report­ed by the Euro­pean Auto­mo­bile Man­u­fac­tur­ers’ Asso­ci­a­tion (ACEA). Pre­mi­ums are still on offer to attract new cus­tomers because EU coun­tries are plac­ing a spe­cial empha­sis on elec­tric mobil­i­ty in their efforts to meet the Euro­pean Green Deal’s cli­mate goals spec­i­fied in late 2019.

Elec­tric cars gen­er­al­ly have bat­tery sizes of 50 to 100 kilo­watt-hours. By 2030, bat­tery pro­duc­tion capac­i­ties will have to exceed 1,000 gigawatt-hours to meet the needs of Euro­pean car­mak­ers. The indus­try, there­fore, faces the dual chal­lenge of reduc­ing its costs while build­ing large-scale bat­tery fac­to­ries in Europe. These gigafac­to­ries will have to oper­ate eco­nom­i­cal­ly and sus­tain­ably. That is the only way to ensure suf­fi­cient avail­abil­i­ty of elec­tric cars in every price class.

“World­wide demand for trac­tion bat­ter­ies is like­ly to increase more than ten­fold by 2030,” says Frank Seuster, Part­ner for Prod­uct and Tech­nol­o­gy at Porsche Con­sult­ing, in explain­ing the cal­cu­la­tions by his team of experts. “By 2030, Europe alone will need twen­ty gigafac­to­ries to meet local needs.” Which bat­tery tech­nolo­gies are pro­duced, which pro­duc­tion process­es are used, and which site loca­tions are cho­sen will be cru­cial fac­tors for the busi­ness suc­cess of these com­pa­nies and their investors. Accord­ing to Seuster, more than 50 bil­lion euros will need to be invest­ed Europe-wide by 2030 for bat­tery cell pro­duc­tion alone.

From the customer’s per­spec­tive, elec­tric cars have to per­form well com­pared to con­ven­tion­al car mod­els with com­bus­tion engines. Many elec­tric cars offer advan­tages in terms of accel­er­a­tion and dri­ving com­fort. How­ev­er, most cus­tomers are cur­rent­ly inter­est­ed pri­mar­i­ly in being able to drive long dis­tances with­out breaks, i.e., in hav­ing to stop less often at charg­ing sta­tions. One solu­tion is to have more pow­er­ful bat­ter­ies with high­er ener­gy den­si­ties. A bat­tery of the same dimen­sions would then have a greater range. Devel­op­ment work is there­fore con­cen­trat­ing on increas­ing the ener­gy but not the space. On top of that, bat­ter­ies have to cost less. Both of these goals can be met with the help of tech­no­log­i­cal advances.

Pro­duc­ers and sup­pli­ers are there­fore devot­ing inten­sive efforts to improv­ing extant lithi­um-ion tech­nolo­gies. Over the past two decades, they have man­aged to lower bat­tery costs by around 80 per­cent. Step-by-step replace­ment of expen­sive cobalt with nick­el has played a promi­nent role here. Both of these met­als bind lithi­um in the lay­ered struc­ture of cath­odes. The high­er per­cent­age of nick­el has also helped to triple the ener­gy density—which is respon­si­ble for the battery’s size and weight—within the same peri­od of time. To fur­ther increase the range, a num­ber of pro­duc­ers are study­ing how to enhance the chem­istry of nick­el-rich cells, with a spe­cial empha­sis on safe­ty and life span.

“Ener­gy den­si­ties can be fur­ther improved by rais­ing the per­cent­age of sil­i­con in the anode. Research is focus­ing on ensur­ing a suf­fi­cient­ly long ser­vice life,” says Lukas Mauler, Man­ag­er at Porsche Con­sult­ing and an expert in the field of bat­tery tech­nolo­gies and the mar­kets for these high-pri­or­i­ty prod­ucts. Mauler notes that depend­ing on the vehi­cle seg­ment, it can also make sense to use other chem­i­cal com­po­si­tions of lithi­um-ion cells. “For short-dis­tance trav­el, lithi­um iron phos­phate cells can accel­er­ate the tran­si­tion to elec­tric mobil­i­ty because the cost ben­e­fits of this tech­nol­o­gy appeal to car buy­ers with a strong inter­est in price,” he sug­gests, adding that long ser­vice lives are also attrac­tive for com­mer­cial vehi­cles and pur­pos­es. Prospec­tive Gigafac­to­ry builders should there­fore choose the right future-ori­ent­ed tech­nol­o­gy for the vehi­cle sec­tor they expect to serve. Mauler notes it is essen­tial for the prod­uct range to be flex­i­ble in order to address dynam­ic devel­op­ments on the mar­ket. This also applies to the post-lithi­um-ion tech­nolo­gies of the future such as solid-state bat­ter­ies. Pro­duc­tion of this tech­nol­o­gy is expect­ed to start with­in the next ten years.

The pro­duc­tion spaces at Gigafactories—where elec­trodes are man­u­fac­tured in mul­ti­ple steps, mount­ed in cell form, and acti­vat­ed for later use—are under­go­ing dynam­ic devel­op­ment on a con­tin­u­ous basis. Con­sid­er­able cap­i­tal is need­ed to set up this type of fac­to­ry: between two and four bil­lion euros depend­ing on antic­i­pat­ed annu­al pro­duc­tion fig­ures. Accord­ing to the cal­cu­la­tions in Porsche Consulting’s tech­nol­o­gy-based cost model, the high­est sin­gle invest­ments go to machin­ery and plants and account for around 10 per­cent of bat­tery costs.

Oper­a­tions at exist­ing Gigafac­to­ries have been made more eco­nom­i­cal by speed­ing up process­es and there­by low­er­ing pro­duc­tion costs. Addi­tion­al effects are expect­ed in the near future. New process tech­nolo­gies like dry-coat­ing the elec­trodes promise fur­ther reduc­tions in cost. “Elim­i­nat­ing sol­vents that harm the envi­ron­ment means you can also elim­i­nate the need for cost­ly dry­ing peri­ods that require high lev­els of ener­gy,” says Dr. Fabi­an Duffn­er, Senior Man­ag­er at Porsche Con­sult­ing and the expert team’s spe­cial­ist in pro­duc­tion and costs. “This has a valu­able dou­ble effect because you not only lower costs but also improve vehi­cle life-cycle assessments.”

All man­u­fac­tur­ing process­es can be made more effi­cient and sus­tain­able by avoid­ing or min­i­miz­ing rejects. That also applies to the defect rate in bat­tery fac­to­ries. The solu­tion con­sists of early warn­ing sys­tems that pre­vent defects from aris­ing in the first place. Smart fac­to­ry strate­gies that dig­i­tal­ly con­nect all the machines and plants can help by enabling reli­able prog­nos­tics. If pro­duc­ers incor­po­rate these types of enhanced process­es in the ini­tial plan­ning stages for their Gigafac­to­ries and com­bine them with inno­va­tions, they can help achieve afford­able and envi­ron­men­tal­ly-friend­ly elec­tric mobil­i­ty, reduce invest­ment costs, and remain com­pet­i­tive over the long term. Porsche Con­sult­ing advised LG Chem, a South Kore­an bat­tery maker and leader on the glob­al mar­ket, on set­ting up its bat­tery fac­to­ry in Poland. Kyong Deuk Jeong, Pres­i­dent of LG Chem Wrocław Ener­gy, report­ed that “with the main­te­nance approach of Porsche Con­sult­ing, we are able to increase our out­put by 14 percent.”

The cell fac­to­ries of the future will be among the largest pro­duc­tion build­ings in the world. The respec­tive com­pa­nies favor dif­fer­ent sites for their invest­ments. North­volt has picked Swe­den, Volk­swa­gen has cho­sen Ger­many, and LG Chem has opted for Poland. Prox­im­i­ty to the auto­mo­tive pro­duc­tion facil­i­ties scat­tered across the EU is not the only fac­tor to play a role. Oth­ers include the avail­abil­i­ty of skilled work­ers, the antic­i­pat­ed costs for ener­gy and per­son­nel, and the avail­abil­i­ty of renew­able “green” power.

The com­pre­hen­sive site com­par­i­son by Porsche Con­sult­ing has shown that some EU coun­tries do espe­cial­ly well in meet­ing two of these cri­te­ria but no sin­gle coun­try cur­rent­ly leads in all three. Man­u­fac­tur­ers, there­fore, select their sites to fit their mar­ket posi­tions and strate­gies. “New­com­ers pre­fer coun­tries with a suf­fi­cient pool of bat­tery experts in order to catch up in terms of exper­tise, where­as estab­lished mar­ket lead­ers opt-in part for cost ben­e­fits in wages and ener­gy,” says Dr. Fabi­an Duffn­er. Cell mak­ers are also using renew­able power for their Gigafac­to­ries as a way to stand out, which gives them a fur­ther com­pet­i­tive advan­tage. “In addi­tion to zero-emis­sion dri­ving, cus­tomers and the pub­lic in gen­er­al care about the resources con­sumed in their vehi­cle’s pro­duc­tion process and bat­ter­ies make up a large share of that,” explains Dr. Duffner.

Can Gigafac­to­ries ful­fill their cru­cial role in achiev­ing cli­mate-neu­tral mobil­i­ty and there­by soon become giga-busi­ness­es? Out­stand­ing oppor­tu­ni­ties do in fact await far­sight­ed and strate­gi­cal­ly mind­ed investors and man­u­fac­tur­ers. “Dynam­ic devel­op­ments in bat­tery tech­nol­o­gy are gen­er­at­ing enor­mous mar­ket poten­tial on a trans-indus­try basis. Not only the auto­mo­tive indus­try but also and espe­cial­ly the machin­ery and plant engi­neer­ing sec­tors can ben­e­fit from entire­ly new pos­si­bil­i­ties,” says expert Lukas Mauler. In order to assess inno­va­tions on an over­all basis, the Porsche con­sul­tants col­lab­o­rate with a net­work of indus­try experts and researchers. Togeth­er the spe­cial­ists use reli­able fore­cast­ing mod­els devel­oped specif­i­cal­ly for this pur­pose in order to eval­u­ate mar­ket poten­tial. “If the indus­try choos­es the right course now in build­ing bat­tery fac­to­ries, cars with elec­tric dri­ves will cost less than those with com­bus­tion engines by 2025,” pre­dicts Mauler on the basis of his lat­est calculations.