With all the doom and gloom pervading the advanced battery industry over the past several months—from the bankruptcy of A123 to the fire on board Boeing’s 787 Dreamliner—the Frost & Sullivan report this week on the future of the lithium-ion market must seem a bit of a surprise to some. According to Frost & Sullivan, the global lithium-ion battery market in 2012 was $11.7 billion. That market is expected to double—that’s right, double—by 2016.
Where this growth is projected to occur is particularly interesting. Today, 64% of the lithium-ion battery market is in consumer batteries (i.e., laptops, cell phones, cameras, etc.). While further growth in the consumer battery market is expected through 2016, particularly in the developing world, consumer batteries are expected to constitute only 52% of the lithium-ion battery market by 2016.
The rest of the market growth is expected to occur in two sectors: automotive and industrial (which as defined by Frost & Sullivan includes grid-connected electricity storage). Over the next four years, automotive will grow from 14% to 25% of the market (a CAGR of 37%) while industrial applications will grow from 22% to 23% (a CAGR of 18%). China is expected to be the largest market for lithium-ion automotive batteries in 2016 (40% of the market), due to strong government incentives for EV’s. North America will remain the largest market for industrial lithium-ion batteries in 2016, though the rates of growth in Europe and Asia in this sector will surpass that of North America. Growth of the industrial lithium-ion market in Europe will be driven in part by increased investment in grid-connected storage in Germany.
The message of the Frost & Sullivan report is clear, though somewhat nuanced. What is clear is that the lithium-ion market is set to grow dramatically over the next four years. This growth, however, will be driven in part by continuing government support for certain applications of lithium-ion battery technology: EV’s in China and grid-connected storage in Western Europe.
The real growth driver for the lithium-ion battery market, however, is something I have written about before: Economic growth in advanced economies depends upon making all aspects of modern technology more and more efficient. Greater efficiency will generally require the use of more electric current and its storage for that use in ever smaller mass. This fundamental fact of technology development is what ultimately drives Chinese and Western European government investment in lithium-ion battery technology and its applications. The U.S. government and U.S. economy ignore this fundamental fact at their great peril.