201. Battery Boom or Policy Bust? The Big EV Divergence - Oct25

With Laurent Seguelen from London and Gerard Reed from Berlin, this is Redefining Energy. Today on Redefining Energy, Gerard, we're going to talk about EVs and batteries. Absolutely. And the incredible progress we're seeing in terms of technology development and also cost reductions. But first a word from our partner. Abloco Energy is Europe's Premier Leaser of 10 foot container mobile batteries and built in Europe with CATL Best LFP cells. Abloco Energy serves 14 European countries including France, Germany and the UK. Abloco's batteries can be leased for any duration between six weeks and six years. And they are monitored by the Dutch award winning platform school, Abloco Energy. Make your life easier, make your business more flexible. Back to the show and the volumes. This year the best market is going at 40% year on year and the EV market is going to expand by 26%. We just had the latest number from Benchmark Mineral Intelligence for the first nine months of the year. Global 14.7 million including so China 9 million plus 24%. Europe 3 million plus 32%. North America only plus 11%. And listen to this rest of the world. Plus 48%. Insane. Yeah. And listen, we are getting to the point now where these cars are now cheaper to actually buy than the internal combustion engine equivalents. And that's why in the rest of the world it's growing. Because at the end of the day, the Chinese are now coming out with low cost cars that are cheaper to buy and cheaper to run. So those numbers come from Benchmark Mineral Intelligence. We thought it was a good idea to bring in the brilliant Iola Hughes, who's head of research at Benchmark Mineral Intelligence. So let's bring her on the show. Hi Ola, it's great to have you on the show. Thanks very much for having me. Well, especially it's great to have somebody who knows something because we have so many experts who know nothing. And what we really like with you is that you, you are keeping track of all the data around batteries, EV ESS and so on. So we brought you in to discuss the state of play at the end of 2025. Maybe we're going to start with the batteries. So I would say the cells. What do you see there? Last to unpack. It's been a busy year for sure. I guess first place to start is just in terms of kind of headline battery demand growth. We're expecting that to come out at about 23% growth compared to 2024 levels year to date. When we look at the different markets Generally we're at 28% growth. The EV market is up just over 30% year to date. And then the energy storage market is up over 40% year to date. So that's certainly where we're seeing the strongest growth up from, from the battery perspective. I think the other thing just to kind of highlight before we get into the kind of detail of the different markets is in terms of the chemistry splits that we're seeing. We're now seeing LFP chemistry share in the EV market over 50% and that's really on the back of strong sales in China and really dominance in LFP in Chinese EVs. And then of course in the storage market, we're seeing well over 90% LFP share. So when you bring those two markets together and because the storage market is growing a lot faster than the EV market, we do see this LFP market share really kind of growing its dominance. Explain a little bit about LFP and the different chemistries just because like not all our, all our listeners are experts in that area and just talk about really the changes that have taken place in the last few years so that you can give context to people. Yep, for sure. Yeah. So LFP is a lithium ion phosphate battery. That is the cathode chemistry. So it makes up half of a lithium ion battery. On the anode you have graphite. That chemistry historically was seen as maybe not as a good option for EVs for high power kind of applications because it had a lower energy density. However, there'd been significant improvements over the last few years that has enabled that chemistry to now be used more widespread. The alternative chemistry is ncm, which is nickel, cobalt, manganese. That chemistry does have intrinsically higher energy density behind it. But we've seen this big advancement in how good LFP is and what that means is we're now seeing it really deployed across all vehicles, depending on if they're your small segment a class, cheapest vehicles all the way through to the premium end in the Chinese market. And in China, you know, we see over 80% LFP share in EVs outside of China it's a bit of a different story and maybe we can get into some details on that in a bit later. Those cells which are like a big book and of course now I don't know if it's the state of the art, but you know, we see it pretty much everywhere. It's what we call the 314amp hour cell from CATL. Is it exactly the same block who goes into a car and an ESS system or do you see a divergence? You know, even if the chemistry says the same, how the form factor diverging? Yes, a big divergent. Historically, the energy storage market was really using the same cells you use in ev. It was almost acting as a bit of a surplus market. Whatever was left over will funnel that towards storage. However, over the last few years, the storage market has become very dedicated in its cell design. So those three 1, 4 and power cells you referred to are specific energy storage cells. In the EV market, we'd see pretty different form factors being used. Things like the BYD blade battery, which is the really kind of long thin battery pack which allows you to get high energy density in a vehicle. Those 314amp power cells and storage are now being pushed to the next level. We see 500amp hour plus cells entering production and actually just a couple of weeks ago we saw BYD announce a 2710amp hour cell. It's fun to see some huge, huge cells come through. How kind of practical that is in the real world is still a bit of a question mark. But that's definitely a big trend we've seen is these cells are getting bigger and bigger dedicated to the storage market. And really the reason behind that is because one of the key ones is driving down cost. Because when you then put that into a containerized solution, you get much more energy density within your 20 foot container, for example, less components, less other parts of the cell, and starts to have big implications on cost. That's probably a good segue into talking about costs. So maybe you could talk a little bit about what's happened at the cell level and also the pack level just over the last whatever, 18 months. Ultimately let's, if we talk about say the storage market and the EV market slightly individually, if we were to talk about cell prices, essentially cell prices have fallen significantly over the last few years. End of 2022 was when we saw the highs really that's timed with when the lithium carbonate and lithium hydroxy price reached its highs. Since then, the raw material prices have declined significantly, reaching their current kind of floor. However, at the same time we've also seen innovation happening at the cell at the system level, which is also driving down that cost decline that we've seen. So you have two huge drivers for cost decline coming through. When we look at the system level costs, for example, for energy storage in the Chinese market now, we see projects which are going through $70 kilowatt hour system cost, that price could have easily been three, four times that a couple of years ago. And when you say 70, you're just talking about the battery packs. You're not including containerized AC solution plus installation in China, in the Middle east, we're also seeing prices similar level to that. If we were to then compare that to say the US market, if you were to use say Tesla Megapack AC solution, you'd be looking over $200 a kilowatt hour. Because even you Raw Motion benchmark and Bloomberg, everybody, we were making those predictions even three, four years ago. I would see those curves going down and going towards hundred dollar per kilowatt hour at cell level. And five years earlier we had 70 at system level. Absolutely. That milestone, you really just blew past it at the cell level. Now for an LFP cell in China, you know, we hear prices from 30 to $40 kilowatt hour. So yeah, incredible strides that have been made. Can I switch then to EVs and talk a little bit about that? Because what for me is interesting is just I'm obviously looking at two things. I'm looking at range of the cars as the range of the cars are getting better. And what you're also seeing is the cost of them are coming down. But when I listen to the prices you talk about, I cannot imagine that those prices are in the EV that I'm buying right now. Or are they? We see some cheaper batteries going through to vehicles. I'd say the Chinese market more so than elsewhere. Those sort of low, really low prices that we are seeing would be typical of more storage cells. We see maybe some lower quality cells going in storage compared to the EV MOKR in terms of how that translates to actual EVs. One thing we do is we track for say the top 15 vehicles for BEV and ICE in each market. What's the price differential that we're currently seeing? And in China we Now see a 4% price differential. So it's 4% cheaper to buy an EV in China compared to an ICE vehicle. If we then compare that to the US and the European market, in the US is 44% more expensive to buy an EV. And then in Europe it's 83% more. Expensive to buy an EV right now, 83% more expensive. And is that still just because the automobile manufacturers have gone at the upper end of the market when they bring in electric cars? Is that the reason? That's definitely a big part of it. We are starting to see the entry of some smaller segment vehicles in the European market, but they still make up a pretty small market share. And they still come in at a high price point. Can I ask then, what we saw in 2025, towards the end of the year was we saw Volkswagen beginning to sort of shutter its production. I'm talking about EV production. And then I, I look at it and I sort of say, is this a Volkswagen problem or is this a problem with EVs in general? My own gut reaction would be this is a problem with Volkswagen and they just don't have that cost in order. Because I see improvement, I look what BYD is producing and I compare it to Volkswagen. I go, I'm not going to buy the Volkswagen, but I'd love to hear your view on it. When we look at European sales this year, broadly, they've been good. We've seen. So last year penetration rate in Europe was 20% and this year we're expecting to finish the year at 26%. And worth noting as well that last year we actually saw a decline in penetration rate. So really you're kind of comparing it to two years ago. And yeah, 26% quarter of vehicles being sold in the European market are electric right now. So progress is good. Compare that to the US, it's about 10%. A lot more is really kind of happening. The key reason behind that is the EU policy. So this year was a step change year in CO2 emission policy. What that means is OEMs were required to sell a greater number of EVs in order to avoid fines. When we then put that in the context of how different European OEMs are doing, we have certainly seen an uptick from vehicles coming from elsewhere. In the first half of the year, for example, just over a million EVs were sold in Europe and about 20% of that was coming from China. Interestingly, that's actually a decline in market share compared to last year. And we saw about 25% coming from China last year. You know, the volumes have been pretty strong. One thing to note, and I think this is one of the key things, is Europe did introduce tariffs on Chinese vehicles last year, but those tariffs only apply to BEVs. So we've seen a big uptick in plug in hybrids coming from Chinese players into the European market. And BYD's plug in hybrids being one of the key ones there. That's a lot of information. Let me process it. So, 25% penetration in Europe, of which how many of those cars are produced in Europe? How many of those cars are produced by European OEM but in China? And how much are pure Chinese? Do you have that split just in. Terms of ones produced within Europe, 70% in the first half of the year. So that's good. That's good, yeah. And that was up from. Averaged around 65% over the last five years. That is a clear indicator that things like those tariffs are having an impact. On that, which brand are the best. So in terms of the top players in the eu, you've got VW leading the way year to date, and they've actually sold basically the same amount in the first eight months of the year as what they sold in the full year, 2024. Next up you have BMW and there's a big differential. VW sold about three times more than BMW has year to date. And then next behind that you have Stellantis with just over 200,000 units in the first eight months of the year. Worth noting as well that Tesla in the first eight months of the year is currently coming in in eighth position, whereas last year, for the full year they were in second place. So big, big drop there for Tesla sales. Can I ask you, and how about BYD on that list? BYD is coming in on 10th with just under 100,000 sales, which, you know, is quite a big step up because last year, for the full year they did about half that. So they've doubled in just the first eight months of the year. I see all their, those new ships they have, in fact, they can export much more now because they own their own fleet. Okay, so that's Europe. Can we switch to the rest of the world? You know, before we look back into China, we hear that in the rest of the world it's very strong and it's mostly Chinese. Would you see it the same way? Yeah, for sure. Definitely. Seeing the expansion of Chinese OEMs elsewhere in the world. If we look at South American markets, the Australian market, the rest of Asia really starting to see the dominance of Chinese players coming through there at the loss of other key players. Historically, particularly players like the Japanese and the Koreans have historically had good market share in the ice market. And places like Australia, they're really losing out to Chinese EV manufacturers. And it's reflected as well in the chemistry split that we see coming through in the rest of the world. Whereas Europe and the US we aren't seeing that much LFP come through yet because the Chinese influence is smaller in those rest of world regions. We do see strong dominance of Chinese cells in there as well. Iola, earlier in the year what I did was I just went and had a look at the costs of production of say a BYD against A Volkswagen. And what I sort of realized was just the cost advantage that BYD had where I'm coming from, that is, that surely means going forward that BYD is just going to continue in, in market share going forward. Would you have a similar view of that or how would you think about this? It's something that we ran quite a lot of analysis on when the tariffs were introduced really to kind of see how much potential do these Chinese players have to absorb tariff costs essentially and still offer their products at a similar price to what they may get from a traditional European oem. The production costs come in a lot lower in terms of current price of the market. They are applying pretty big margins within Europe. So the price differential that consumer sees isn't as significant as what you would see from the production size. I think the other thing to consider as well is just how things play out with tariff strategy. Right now there is this loophole of plug in hybrids. Whether that gets shut is a question mark. At the same time, potentially there's talk now of Trump suggesting that Europe needs to impose 100% tariff on China, on India, on other countries. If anything like that comes through, that could obviously then change the dynamic quite significantly. And given the tariff world that we live in these days, nothing has really asked the question when it comes to potential variations. I read a lot of articles in the press and the great thing is source is always remote. So we go back to the source. When it comes to China, the situation seems absolutely absurd. I read that they sell more EV in China than the all US market. So that's number one. But number two is the factory capacity that they have put together. Because we always talk about BYD and a few others, but you know, there are hundreds of brands and there's a price war. And of course BYD say I'm going to survive, but the others are going to go down, especially the one who can't export. So I hear they have a capacity of 50 million cars in China or something like this, which is like three quarters of the world market, every engine combined. So what's your take on what's going on in China? Because they clearly overbuilt. Yeah, yeah, definitely. Things in China, I think are accelerating faster than really any analyst expectations. One thing that I just did look at before this call because I was curious to see how it's changed in the last year or so. So currently this year China EV penetration sits at about 50%. By 2030, we're forecasting that to reach just under 80%. If we compare that to our forecast from Q1 of last year, we were only expecting it to reach 65%. So basically over the last year and a half, our view of that Chinese market has accelerated so much because of how quickly things are moving and how commitments continue to be made on the policy side from the OEMs themselves and also the cost advantages too. So there's really no stopping China Chinese market growth at this point. There is definitely an element of oversupply, price wars, a lot of competition. We're going to see a lot of consolidation in the market for sure. But in terms of market growth, it seems to be a key pillar of China's next five year plan and they see it as a key industry for supporting that. So, yeah, expecting strong growth to continue. Can I ask, what's your view on the rest of the world then? Are you upping your numbers there or downing them or how do you see. That the US one is the one which is probably the most shocking? And understand, not surprisingly so, given the changing policy landscape that we've seen this year, we're currently satisfied about 10% market share for BEVs and plug in hybrids. By 2030 we're now expecting 18% market share, whereas comparing to that same Q1 2024 data point, we were expecting 40% market share. So really in the US you've got two major things which are impacting that forecast. The removal of the EV tax credit, that $7,500 tax credit, and then also the changes for the EPA standards. So the emission standards, that policy was historically quite strict in terms of water required for people to sell. The removal or can strip back of those is going to be a big one. Along with CAFE standards, the CARB standards, various different emission related standards that exist in the US that have already going away under the current administration. The Americans have decided to kneecap the EV industry because a their OEMs are struggling to convert and B they've got. A lot of cheap oil. But there is clearly a divergence. You see China going on one side and then some parts of Europe following quite fast and as you said, some part of the rest of the world following because probably more at the expense of the Japanese than the German because there's a lot of segments that the Chinese are in and used to be taken over by the Japanese and the Koreans. Do you see those trends well established and going on like this till the end of the decade? Yeah, there's a lot of uncertainty in the market and we are increasingly seeing OEMs announce that they're going to where they had committed switching lines or building facilities dedicated to EVs, pulling back on those plans, pushing out the launch dates of various EV models. So the momentum has definitely been kind of switched off on the EV side. One thing that's kind of the silver lining for the battery industry and where we're seeing a lot of activity is the storage market. In the US market now we've seen a whole range of the Korean cell manufacturers who had EV capacity that have taken those lines and converted it and making energy storage cells. And they see it as a more stable demand market that will continue over the next 5, 10 years despite the policy environment. And they want to tap into the tax credits. So if that's what they need to do and they need to produce LFP for energy storage, that's really where they're looking now. Ayola, thank you so much for the analysis of demand. Is there anything from the supply angle you want to share with us? Yeah, yeah, just worth putting some context of Chinese dominance and supply chain is pretty useful. You know we've spoken today a bit about the cell side. So when we think about cell production right now, but 80% of that in the Chinese market, when we think about LFP specifically, that chemistry being used for energy storage and increasingly in EVs, you're looking at kind of 98, 99% current market share. That is going to start to change with some of those Korean players switching lines. When we then go a step even further, kind of into the cathode and anode. For the cathode you're looking at 87% Chinese dominance. And for LFP again 99, close to 100%. And then for the anode as well, you're looking at 95% Chinese dominant. So the key thing just from that is there's so much opportunity in this market, particularly in that midstream and kind of cell production area. And a lot of work that needs to be done still to really make that a much more global picture. Yeah, look, we're kind of wary of all the startups which have emerged the past five years. Took a lot of investment, public money. Of course, everybody saw Northvolt. In your opinion, does any of those startup has a chance considering the rate of technological advancement and price decline? Not just this, but you know, we can conclude on sodium ion or whatever you want. But it seemed that this LFP is a total juggernaut and only a few people can harness it. Let's conclude with that. I hope so. I have every hope that there'll be some Western startup that will succeed. The real pathway that we're going to see more of going forwards is more partnerships. So people relying on Chinese or Korean, Japanese know how working together and bring that technology across to Europe or the North American market. And sodium ion for sodium ion, this. Is a chemistry which caught a lot of attention back in 2022 when lithium price was very high, I would say. Now we still do see announcements trickling through, but at the current price of lfp, so it's pretty hard for sodium ion to compete. There will be some use cases where you may see a good benefit. For example, hybrid projects in China that are using sodium ion for their cold temperature benefit. But in terms of mass market, we're not really expecting that to come through anytime soon. Well, Ayola, thank you so much for coming on the show. Looks like we lost Gerrard. Look, it's always great and I want to tell our listeners RawMotion and Benchmark in general, these are the best data on this planet when it comes to what's happening in the battery sector and the EV sector. So really rely on those extraordinary research that you are conducting. Thank you so much Ariela for coming on the show. Thanks Johann Jaab. That young lady is brilliant. I mean she's really great. Absolutely. What I conclude from all of this is that EVs are unstoppable. Simple as that. It's just the performance improvements, cost reductions, game over for internal combustion engine. You know, and don't get me wrong, different regions are going to go at different rates. So the Chinese obviously are electrifying quicker than anybody. The Americans are probably doing it slower than everybody. But the reality is the rest of the world is going to follow China. Oh yeah. Look, I'm very worried about the US because there's been a decision by the current administration to kneecap the industry. Rolling back incentive tax credits, rolling back any regulation, you know, like emission standards. And if you look at what's happening in the U.S. okay, yes, there was a pop in the market in September, but it was because the end of the tax credit and GM last month took 1.6 billion charge due to a strategic pullback from its EV. We have Nissan stopping EV production in the US going back to hybrids. There is a real divergence between the US and the rest of the world. Yeah, you are totally right, Laurent. And by the way, it reminds me of. Let's imagine we are at the turn of the 20th century and you turn around and start subsidizing the horse and cartoon. Good luck to you on that. That is a really great industrial strategy. It's a short term sugar high. But I don't really know what Europe is doing. As usual, they're kind of in the soft middle. But what we've seen also recently is VW has announced 50,000 job losses and the market share of EVs in the UK and Germany now is above 35%. How much do we need to protect our industry versus letting cheap Chinese, cheap. But good product through? That's the big question. And the answer is not simple. No, the answer is not simple. And, but, but I think the bottom line is the industry does need to restructure. There's no way around it. I mean, look, you're seeing peak internal combustion engine demand. You know, in that type of area, what happens is you consolidate, you focus on reducing costs, et cetera, et cetera. And that's, you know, Europe is a huge industry within Europe, so no choice but to go that route in the next few years. And at the same time, if you want to compete globally in these new electric technologies, then you need to innovate as well. So no, not easy for the European industry. Well, in a certain way the good news is batteries are becoming pretty cheap. So in fact, Europe is going to benefit from those cheap batteries and even a lot of power electronics are becoming very ubiquitous. So whatever advance China has, I think it's going to be relatively easier. Well, easier between air quotes to catch. And at the same time in China, I mean, the story of overcapacity is mind blowing and of course they're going to be consolidation and you start to see cracks in the system. Last month there is Nio, which is one of the company which has been really promoted as, you know, one of the new leader and they have been sued by gic, which is the Singapore sovereign fund for inflating revenues by $600 million. So I mean, China is great, but also there are a lot of shenanigans. Yeah. Where you tend to have booms, Lauren. You also tend to have busts. That's sort of a little about what we're seeing as well. Right. This, the Chinese approach is to actually have lots of competitors going out of market, basically set animal spirits free and then best guys win. Right. So you know, what you're left with is the byds of this world. Yeah. So look, it was a very interesting conversation. We thank Ayoola for coming on the show. We really appreciate everything she does. And more generally, benchmark mineral intelligence. The future is bright, but a lot. Of work needs to be done. Exactly. So thanks Aool. It's great having you. Look forward to speaking to you soon. Thanks Laron Speak next week. Cheers. Thank you for listening to Redefining Energy. Don't forget to rate the show and subscribe on Apple Podcast, Spotify or the platform of your choice.