The introduction of electric passenger vehicles is projected to play a role in a worldwide frenzy to increase the world's Li-ion battery production capacity to satisfy growing demand.

In 2030, a yearly requirement for batteries will surpass 7 terawatt-hours (TWh) when combined with various kinds of electrified transportation and storage usage.

Given that manufacturing capacity was only 0.76 TWh at the end of 2020, a $560 billion investment is projected to be required to bridge the deficit, according to Rystad Energy research.

With accumulated historical investments in Li-ion manufacturing reaching a fairly modest $128 billion towards the end of 2020, this decade's expenditure to meet demand will elevate accumulated historical funding in the industry to around $690 billion by 2030, and to more than a trillion dollars in the following years.

The prices of building battery manufacturing capacity have decreased over time, and the planned investment will increase overall production capabilities to 6.9 TWh by the 2030s. The present capacity and anticipated investment expansions, and unidentified initiatives proposed by worldwide firms, total 6.5 TWh.

The leftover 0.4 TWh should be fed into other projects that are required to meet global demand.

Projects for so-called giga factories — facilities capable of producing an annual capacity of 1 gigatonne-hour (GWh) or more — are expanding, adding to scale economies that permit for more cost-effective battery cell manufacture.

Our forecast for such a decade comprises around 3 TWh in declared projects, with an additional 3.4 TWh likely to enter the mix by 2030 because of development plans proposed by Contemporary Amperex Technology Limited (CATL) and Tesla.

“According to our study, $80 billion in battery sales are planned for 2021, representing a 26% increase over 2020 levels. Given the growth in battery requirements, we anticipate that yearly sales will exceed $130 billion in 2025 and over $160 billion in 2030.

“This growth rate is lower than the worldwide capacity growth rate, but owing to planned improvements in battery chemistries and learning curve reductions, battery prices are likely to fall this decade, enhancing profitability,” said Matthew Wilks, senior analyst at Rystad Energy.

Continuing the historical production pattern, the majority of investments in 2020 were centered in Asia, with the region accounting for 85% of the $98 billion spent between 2015 and 2019.

Asia's market share fell to 76% in 2020 due to an increase in the number of European projects announced in recent years, and the Asian share is expected to decline significantly as more European projects are approved. By 2024, Europe's share may have risen to more than 40%.

A supply gap is predicted to arise beginning in 2029, with the anticipated investments necessary to fulfill demand resulting in an increase in expenditures thereafter the decade. This expansion has the potential to boost yearly spending over the $100 billion marks by 2030.

Expenditures in battery plants have totaled $263 billion over the period 2015 to 2030. CATL dominates the market, accounting for 16% of total planned expenditures for the period.

The $43 billion commitment includes a $2 billion investment in the Erfurt facility in Germany, the company's first venture into Europe, and a $2.8 billion investment in increasing manufacturing in China at factories in Fujian, Jiangsu, and Sichuan.

Rystad Energy believes that a further $71 billion would be needed to double the company's production capacities from 0.55 TWh per year predicted in 2020 to the 1.2 TWh desired level by 2025.

Depending on its stated giga factories, Tesla is expected to account for 7% of total worldwide expenditures through 2030, totaling $18 billion in investments for the time.

However, including its rapid anticipated increase in production capacity to 3 TWh by 2030 from present levels of roughly 50 GWh, we anticipate an additional $230 billion in the capital would be required. This number is about equivalent to the total of all capital pledges reported so far in May 2021.

Volkswagen, which has declared six European giga factories, accounts for 12% of total worldwide investments, even though the first of its facilities is not expected to open until later this year. Furthermore, SVOLT, LG Chem, Farasis, and BYD have all pledged to invest more than $10 billion throughout this time frame.