Curve of insanity, a

reality check and a

look at the future
Batteries Event 2023
Lyon 10-13 October 2023

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission
of McKinsey & Company is strictly prohibited
Battery demand will grow to ~5.8 TWh in 2030,
with >30% growth across all regions
As of Q1 2023

Global battery demand by application, TWh Global battery demand by region, TWh
~250
Electric mobility Consumer electronics China North America RoW New gigafactories needed by
Energy storage Europe Developed Asia 2030
5.8 5.8

$375b
Revenue pools by 2030
19x
~90%
2.2 2.2 of demand driven by the
mobility sector

0.3 0.3
~40%
of demand to come from China
2020 2025 2030 2020 25 2030

Source: McKinsey Battery Insights McKinsey & Company 2

Global net announced nameplate capacity expected to reach ~6 TWh
by 2030, >50% announced by Chinese incumbents
Gigafactory announcements for 2030, as of Q1 2023
Incumbent OEM JV or OEM subsidiary Startup

North America Europe

11
21
39 ~1,250 35
~1,000 China
GWh GWh
81
68 26
~3,650
GWh

91

Rest of World

25
~340 38
GWh
37

Source: McKinsey Battery Insights McKinsey & Company 3

Yet, ~75% of the global battery equipment suppliers are from Asia,
with few emerging across North America and Europe
Estimated number of equipment suppliers by region
2023 Q3 Not exhaustive

North America Europe China APAC excl. China

Electrode
manufacturing 5 24 47 39

Cell assembly 3 15 50 37
Cell finishing 7 23 62 47
Module 3 8 32 8

Pack 3 7 36 9

Source: McKinsey Battery Insights McKinsey & Company 4

The ambition to lower capex continues, with Tesla announcing
goals to reduce factory footprint by 5x for new NV plant
mUSD/GWh
Tesla ambition announced at 2023 investor day

80-90
20x increase in
tool productivity
through automation
65-75

50-60

25-30 5x decrease in
factory footprint

Target average Target Ambition best- Game changers

last 5 years average today in-class today

Source: Expert assessments McKinsey & Company 5

We have vast expertise across …our Battery Accelerator Team
the battery value chain and has designed and built >500 GWh
served >150 clients last year… p.a. of cell production capacity
SELECTION

McKinsey has a broad network of +170

global consultants with specific battery
expertise from both academia and the Steven Prast Jon Haider Johanna
industry as well as along the entire battery Led Tesla inhouse battery cell mfg. Grauers
equipment fabrication team
value chain

+70
experts

+60
Matt Dexter He
Matt Oswalt Burkholder
experts EMEA +40 Led gigafactory engineering and con-
struction in Austin, Freemont and Reno
experts
North
America
APAC

Jakob Clemens
Fleischmann Cepnik
Joe Dufresne
Led battery gigafactory engagements
along the lifecycle globally McKinsey & Company 6
Benchmarked capex for building and equipment at ~60
mUSD/GWh average, and ~50 mUSD/GWh top quartile
2023 best of best benchmark, 20-25 GWh plant

Equipment capex per production capacity, EU NMC, Building capex per production capacity, EU,
mUSD/GWh mUSD/GWh
Electrode manufacturing Cell Assembly Cell Formation & Aging Production - process Non-production
Production - auxiliary operations Clean & Dry room
30 29

10 20-26
16 18-24
6-8
10 10-12
8-10 5
2 3-4
10 6-8 1-2
6 4-6
Average Best in class Average Best in class
(Top quartile) (Top quartile)

~60 m$/GWh
~50 m$/GWh
Data includes 7 plants in Europe with SOP between 2021 and 2025; 4 plants are leveraging planned data, 3 plants actual; Source: McKinsey Battery Insights McKinsey & Company 7
We see a downward trend of cost curve, but data is scattered and
shows a major difference between in and outside China
China
Observations from industry Outside China
Total capex M$/GWh China
Insights from discussions with
Outside China
USD mn/GWh industry experts and executives
180

160

140 Aggressive players in greenfield in

NA and EU set targets below
120
60mUSD/GWh
100
We built our plants in 9 months
80 instead of average 2.5 years

60 Best practice realized in US and

Western Europe around
40 50mUSD/GWh
20 Top players are already below
0
20mUSD/GWh on their building
0 10 20 30 40 50 60 70 80 90 100 110 120 130 today [outside of China]
GWh
McKinsey & Company 8
SOP delays of 9+ months are …reducing capacity during
common… prolonged ramp-up periods
Illustrative
SOP delay
Example Gigafactory line output – Year 1
Company Factory location (months) GWh

Terevola 3 2.50
Atlanta, Georgia 6 0.31
0.38 -43%
Berlin gigafactory 9
0.38 1.43
God factory 9

Reno gigafactory 12

Erfurt 15
Nameplate Availability Performance OK rate Actual
Endicott, Massachusetts 18
capacity losses losses losses capacity
Saxony factory 30
• Reduced sales potential from ramp-up delays in
TBD green facility Cancelled capacity
• Increased costs from excess OK rate losses
Xi’an Phase-II (2017) Suspended

Source: Press search, McKinsey analysis McKinsey & Company 9

CapEx efficiency & ramp-up …of operational excellence
speed are major indicators… among battery players

Risk exposure resulting from poor ramp The best players significantly
up outperform the rest

120 2X Ramp-up
deep dive is focus
average # of days lost compared to best-in-class ramp up faster time to market of this document

0.81 3X
GWh of missed production per line More CapEx efficient

~$20m >30%
of missed profit per line after 36 months of ramp-up challenges less OpEx
(ramp-up with typical challenges relative to best in class
performance)

McKinsey & Company 10

Engineers and scientist focus is now moving from cathode to the
other components of a cell

Intensity of technology
Trend
disruption past/future

A Cathode Cathode: NMC& LFP will be main chemistries for traction batteries

B Separator/ Separator/ Electrolyte: Introduction of solid-state batteries

Electrolyte

C Anode Anode: Evolution of anode materials into lithium metal and silicon

D System/ System/Technology: introduction of alternative ions like sodium

Technology

1. incl. NCA variants

Source: McKinsey Battery Insights McKinsey & Company 11

How much improvement can we expect from these technologies?
Q1 2023

Battery cell cost 2030, global average, USD/kWh Battery cell energy density 2030, Wh/kg
~90 ~400 ~410
-16%
~65 ~65 - 55
+49% ~330

~270

LFP LMFP Na-ion NMC811-Syn. Gra NMC955- NMC955-Si SSB (NMC955

Syn. Gra-Si - Li Metal)

2022 2030 2022 2030

Source: McKinsey Battery Insights McKinsey & Company 12

Solid state electrolytes are an enabler for lithium metal anode, and
some silicon ones
Simplified Composite (e.g., graphite / silicon) Catholyte Conductive carbon Anolyte
Solid electrolyte Liquid electrolyte Active material (CAM) - NMC Binder

Next gen
Cell type Solid electrolyte
Liquid electrolyte

Diagram Current collector (copper) High-Si anode SSB w/ Li-metal anode

Current collector (copper) Li metal anode deposited
on copper current collector
Anode
Anode
Electrolyte Separator Electrolyte
Electrolyte
Cathode
Cathode Cathode

Current collector (Aluminum) Current collector (Aluminum) Current collector (Aluminum)

Energy density 250-300 Wh/kg 300-400 Wh/kg 300-400+ Wh/kg

McKinsey & Company 13

Yet there is different degrees of “solid” for batteries
Comparison of various cell concepts with different fractions of liquid components

Source: Natl Sci Rev, Volume 10, Issue 6, June 2023, McKinsey & Company 14
Next generation batteries are approaching the mass market
commercialization
Li-metal players only

Not exhaustive
Announced
SOP of target OEMs announcing Li-metal battery
Peers Electrolyte 1st block capacity equipped vehicles
Polymer in ceramics (oxide) 2023 10 GWh

Polymer gel 2026 - 2023

Polymer Seres 5
High salt liquid polymer 2026 10 GWh

Polymer Running ~3 GWh

Oxide (with polymer) 2026 50 GWh

2025
Oxide coating 2023 - TBD
Oxide
100% oxide 2026 20 GWh

Semi-solid w/ 50% oxide 2023 20 GWh

2023
Sulfide Sulfide 2027 80 GWh
ET7 + other 3 models

Source: McKinsey Battery Insights, Experts interviews, investor presentations; press research McKinsey & Company 15
Different chemistries have very different impact on production
layout and CAPEX
Indicative level of disruption on CAPEX and production layout
Not exhaustive

Front-end production process Middle production process Back-end process Module assembly
Fabrication of electrodes “Raw” cell fabrication Activation and testing

Innovation

Different CAM
chemistry

Different form
factor

SiOx mix in the

anode

Semi-solid lithium
metal anode

Full-solid lithium
metal anode

Source: McKinsey Battery Insights McKinsey & Company 16

Delays in committed time to reach mass production are already
observed for some Next gen players
Overview of selected SSB players and their respective slippage announcements
Li-metal players only Pilot plant Initial SOP announced Latest SOP announced Slippage
Not exhaustive Giga factory plant (> 5 GWh) Initial SOP announced Latest SOP announced

Company 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
~1-year

Mar. 21 10 GWh
~6-month ~1-year

Jun. 20 July 21 30 GWh

Aug. 20 50 GWh1

~1-year

Jun. 19 7 GWh 35 GWh

~1-year

Feb. 20 10 GWh

No SOP announcement before Nov. 2021

1. Solid Power mentions this production capacity as 3rd party manufacturing due to their licensing business model

Source: McKinsey Battery Insights, Experts interviews, investor presentations; press research McKinsey & Company 17
 Our value proposition

A dedicated team of battery experts Proprietary assets and data analytics

 Team of 15+ researchers and consultants with main  10+ data-driven assets to provide customized
hubs in Europe, Asia and North America analysis
 
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Access to 60+ experts with relevant industry Direct subscriptions for access to tech-enabled
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Value proposition and assets

Our insights
 Access to in-depth battery
insights and expertise covering
key dynamics in the market,
technology, and sustainability
We support clients along the entire battery value chain
 Up-to-date industry perspectives
by continuously integrating and
analyzing the latest industry data
and announcements Battery raw Active material
Battery cell Battery pack End Remanufacturing,
 Customized analytics support and material production and
production assembly and applications battery 2nd life,
benchmarking leveraging advanced mining and battery
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To learn more, reach out to Battery_Insights@mckinsey.com
Source: McKinsey Battery Insights solution McKinsey & Company 18