Industry Voices | New Rules for Battery Industry Success

The battery industry has expanded rapidly due to high demand for battery-electric vehicles, governmental incentive programs to jumpstart production capacity and regulations meant to localize new manufacturing capacity. This rapidly changing landscape poses new challenges for the entire battery value chain.

Production capacity has outpaced global demand for BEVs, temporarily depressing costs and creating overcapacity issues. This poses significant challenges for cell manufacturers. But demand is still growing rapidly in other areas. Battery energy storage system (BESS) production is increasing and expected to grow fivefold by 2030. And companies, startups and large enterprises alike continue making rapid progress in advanced battery technologies.

In this dynamic market, companies must innovate, invest in large-scale battery manufacturing and commercialize new battery technologies to ensure profitability amid declining cell prices and fluctuating global EV demand. Focusing on digital transformation is crucial for sustainable growth.

Data-driven Manufacturing

Reduced cell prices from temporary overcapacity makes manufacturing costs a critical driver of success in the near term; it can account for a quarter of total cell costs. High scrap rates are a major component of this issue. They can reach 40% or more for companies starting large-scale manufacturing and 10%-15% for stable large-scale producers. Reducing scrap rates by a few percentage points saves billions of dollars for large-scale battery manufacturers.

Tweaking manufacturing operation with iterative improvements is not fast enough for success in the shifting battery market. Companies need to adopt data-driven manufacturing that can empower them to collect and contextualize data from machines and factories and allow them to extract battery-specific intelligence to identify and address issues impeding scrap rate and manufacturing quality. Leveraging a comprehensive digital twin, IT-OT convergence and the power of generative AI, machine learning and data analytics, businesses can uncover production issues faster to implement these solutions cost-effectively.

Understanding the shop floor doesn't always require being on the shop floor. Digitalization brings the problem to the engineer.

Simulation guides the interplay of manufacturing steps in data-driven manufacturing. IT-OT convergence delivers executional insights to production and allows collection and contextualization of data across the shop floor. When combined with battery-specific data analytics and AI/ML, this guides rapid identification of faulty cells before they complete formation and aging processes.

New Battery Technology Advancements

Making existing technologies more cost-effective is crucial, but new technologies like sodium-ion chemistries and solid-state architectures could reshape the battery industry. Digitalization, including digital twins, automation and Data and Gen AI, is essential to unlock new innovations and commercialize them.

Rapid advancements in sodium-ion chemistries have already brought the technology to early-stage commercialization in China, catering to small city vehicles with minimal range. Similarly, automakers such as Toyota and Honda, as well as solid-state battery producers like Quantumscape, have announced promising advancement and plans to scale manufacturing. Additionally, new cell and pack designs such as cell-to-pack and cell-to-chassis technology are going to be key to improve battery energy density. The digital twin, with comprehensive simulation and AI models, allows companies to evaluate these many concepts and accelerate their innovation.

The Rise of Battery Energy Storage Systems

Demand for battery energy storage is growing fast, with an expected fivefold growth by 2030. This growth derives from global sustainability initiatives to decarbonize the power grid. Power-hungry AI training and data centers are likely to drive rapid demand for battery energy storage as well in coming years.

Onsite battery storage will play a large role in decarbonization strategies for businesses around the world.

BESS, however, is significantly different from EV batteries and poses a unique set of challenges. For instance, a 1GWh BESS is likely to have 7 million-9 million parts, including 1 million-1.5 million cells. In terms of the overall bill of materials (BOM) complexity, it is equivalent to Boeing 787 aircraft. This poses significant challenges for supplier collaboration, BOM management, inventory management and servicing.

Meeting Imminent Battery Passport Regulations

The battery industry faces increased transparency and traceability demands, driven by government regulations and a need for ethical sourcing and sustainability. EU regulators have mandated that by February 2027 any battery with more than 2 kWh capacity for industrial or EV applications must have a digital battery passport. These passports must contain information about material composition, sourcing location, carbon footprint, performance and lifecycle.

Businesses will need to collect many different data types in a transferable, verifiable and secure manner. While end system integrators are responsible for providing the data that goes into a battery’s passport, much of the information comes from the broader value chain. Data from battery manufacturers and associated supply chain will be required to inform compliance certification and labeling, the total carbon footprint of the battery and information on responsible sourcing. In addition, battery performance over its lifecycle is another key data point for battery passports and will require the reporting of data collected through the battery management system.

Working Toward Future Successes

The growth of the battery industry in the past decade brings opportunity and innovation to the market, but continued growth requires companies to transform their engineering and manufacturing practices. With new demand from battery energy storage and BEVs, rapid reduction in battery prices and new battery technology advancements to come, finding success means scaling operations sustainably with help from the comprehensive digital twin, IT-OT convergence, data analytics and generative AI.

Becoming a digital enterprise helps business find the flexibility to reorient and continue successful operations. That change might come as technical improvements to the product or process, but it can also be a shift in market focus. Batteries have important applications all over our lives. Focusing on only one application, even a large one, is not a sustainable recipe for success. The industry's future has much potential and the right tools can turn that potential into reality.