Growth in electric vehicle adoption spiking lithium demand

24 July 2018 Consulting.us

As electric vehicle (EV) adoption continues to rise, demand is shooting up for lithium – an ultra-lightweight metal used to make EV batteries, as well as rechargeable batteries in many consumer electronics. The global lithium market is projected to grow by a CAGR of 9.33% to 2023.

As governments and consumers look to cut fossil fuel emissions, both policy and preference are spurring the growth of the electric vehicle (EV) market – which includes fully battery-electric vehicles (BEVs), plug-in hybrids (PHEVs), and hybrid electric vehicles (HEVs). Consultancy AlixPartners projects that EVs will account for about 20% of the US market, 30% of the European market, and 35% of the Chinese market by 2030. Meanwhile, the International Energy Agency expects EV ownership to rise from last year’s 3 million units to 125 million units by 2030.

In line with EV market growth, demand for a principal component in their all-important batteries – lithium – is expected to grow strongly over the near term. Market research and consulting firm Mordor Intelligence expects the global lithium market to grow by a compound annual growth rate (CAGR) of 9.33% between 2018 and 2023.

Lithium is used in high-energy density rechargeable lithium-ion batteries, mostly used in consumer electronics and electric vehicles. Battery applications are the number one use of the mineral in term of volume and revenue. Li-ion batteries' low weight, high-energy density, and good recharging capabilities without a degrading ‘memory effect’ make them the number one choice for consumer electronics like smartphones and laptops.Growth in electric vehicle adoption spiking lithium demandLikewise, Lithium’s lightweight properties and high electrochemical potential have made it the top choice for EV batteries. And though consumer electronics command the largest share of the battery market currently, EVs are expected to dominate in the near future, according to Mordor.

With long-term projections for heavy market share of the automotive market, electric vehicles are already making strong strides in terms of adoption, especially in China. Mordor reports that a record 750,000 EV units were registered globally in 2016, with 336,000 of those in China – a 45% share. Chinese consumers are especially eager to adopt electric vehicles as concerns over pollution and smog in their mega-cities continue to mount.  As such, EV sales in China were more than double that of the US in 2016.

Countries with natural lithium deposits will see greater incentives for production as demand spurs on higher prices. Chile has the largest reserves of lithium, followed by China with 26% of global reserves. Despite being home to 5% of the world’s lithium reserves, Australia leads in global production, with 33% of lithium supply. China accounted for 10% of global lithium production in 2015, according to the Mordor report. China, Japan, and South Korea are the principal lithium battery producers, occupying a 96% share of battery shipments.

Demand has already been outpacing supply, according to the report. And with current supplies limited, auto firms are locking into contracts with lithium suppliers. According to analysts, since there is no lithium futures market, battery makers – especially for EVs – are scrambling to lock in their prices through long-term agreements.

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Google topples Apple to take top spot on BCG's list of innovative firms

28 March 2019 Consulting.us

After ranking first on strategy consultancy Boston Consulting Group (BCG)’s top innovators list for 13 years, Apple has finally been knocked off the top spot, landing at third place.

Google usurped Apple’s crown, and Amazon rose to second place on BCG's ranking of the top 50 global innovators. Microsoft and Samsung rounded out the top five, with Netflix, IBM, Facebook, Tesla, and Adidas filling out the top 10. BCG’s ranking was based on a global survey of more than 2,500 senior innovation leaders.

Tech firms dominated the top end of the innovators list. Traditional industries, however, still accounted for more than half of the top 50: Adidas, Boeing, BASF, Johnson & Johnson, and DowDuPont all ranked in the top 15.

The rising importance of digital technology – including artificial intelligence (AI), platforms, and ecosystems – was the central touchpoint of BCG’s survey. Top innovators are increasingly embracing AI in particular to develop new products and services, and to improve the internal innovation process itself.

"Digital technology and external innovation have become watchwords," Ramón Baeza, a BCG senior partner and the report's coauthor, said. "All of the top 10 companies – and many in the top 50 – use AI, platforms, and ecosystems to enable themselves and others to pursue new products, services, and ways of working."

2019 Most Innovative Companies

Platforms provide a foundation on which companies can develop their business offerings, with Amazon Web Services (AWS) and Microsoft's Azure offering some of the leading cloud-based platform services. According to BCG, ecosystems go a step further, pulling together technologies, apps, platforms and, other services to build an integrated solution. Android and iOS, for example, are now a complex ecosystem of telecoms, phone manufacturers, and app developers. AI, meanwhile, simulates human intelligence to achieve groundbreaking new technologies such as self-driving cars and "smart" digital assistants.

The top firms on BCG’s list extensively use AI, platforms, and ecosystems. Google has invested heavily into AI, which is apparent in the company's smart speaker Google Home, the accurate autocompletion of sentences in Gmail, or in its autonomous driving venture. Android, meanwhile, is a truly expansive ecosystem.

Amazon utilizes the cutting-edge Alexa AI voice technology as well as the widely used AWS platform. Apple offers Siri and iOS.

Of survey respondents, 90% said their firms are investing in AI, with more than 30% expecting it to be the innovation area with the highest impact on the businesses in the next three to five years.

Just under 20% of respondents said their companies were strong innovators and above average in AI innovation (what BCG terms "AI leaders"). Among the subgroup of AI leaders, 94% said they see AI as important to their companies’ future growth, as opposed to 56% of AI "laggards" (who rate their AI capabilities as below average).

"AI will have a significant impact on business processes, but its biggest potential lies in developing new products and services that can yield major revenue streams over time," Michael Ringel, a BCG senior partner and the report's coauthor, said.

Which areas of innovation are you actively targeting?

McDonald’s (21st on the list) is using AI algorithms on digital menus that change according to time of day, restaurant traffic, and the weather. Philips (29th) last year launched an AI platform that allows healthcare industry workers to access advanced analytics that curate and analyze healthcare data.

AI is already unlocking value for advanced users: 46% of AI leaders said AI-enhanced products and services represented 16% of sales, versus 10% for laggards.

In a world of platforms and ecosystems, the BCG report found partnership models are gaining steam. Strong innovators have upped their partnership usage from 2015-18, with incubator use rising from 59% to 75%, academic partnerships from 60% to 81%, and company partnerships from 65% to 83%.

Platforms and ecosystems help facilitate innovation, while expanding reach and collaboration, allowing for stronger, multiparty solutions. “Not all ecosystems are alike, however. They have different types of glue that bind their participants. Money is one type, of course, but knowledge, data, skills, and community can be equally important," Florian Grassl, BCG partner and report coauthor, said.

Four companies on 2018's top 10 list were also in the top 10 in 2005: Google, Amazon, Microsoft, and IBM. BCG deems these companies “serial reinventors,” which sets them up well for continued innovation dominance. Google continues to revise its offerings and algorithms, Amazon disrupts new categories and builds new services, and Microsoft and IBM have successfully transitioned into cloud-based services.

"The tools and technologies of innovation evolve,” BCG’s report states. “The basic orientation toward change – never being satisfied and always being willing to reinvent oneself – remains part of some companies’ lifeblood.”