Manufacturing of

Batteries in ASEAN
Jon Canto
Managing Partner, McKinsey & Company Philippines

June 14, 2023

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission
of McKinsey & Company is strictly prohibited
ASEAN countries are moving towards net-zero, ~$100 bn
opportunity arises from low carbon mobility and clean power
ASEAN countries are making
Net Zero Commitments 2030 ESTIMATED SUSTAINABILITY REVENUE POOLS4 , $B
In policy document
Electrification of vehicle power trains –
2W and 4W
Low Carbon Charging infra and energy services
Laos Singapore Cambodia Others Mobility EV financing and maintenance
55- 60 Fleet electrification
Thailand Vietnam
60 -100 Renewable power generation (solar
Declaration/ pledge PV, wind, geothermal, hydro)
Microgrids and resiliency
Flexibility and energy storage
Malaysia1 Indonesia Brunei
35-40
High efficiency buildings
Proposed/ Target under discussion Clean Power Industrial decarbonization
Hydrogen
Myanmar Philippines2 Low Carbon agriculture
1. Carbon neutral target
Bio-energy
2. Reduction v. BAU target
3. Energy sector only
CCUS, NCS
4. Defined as (annualized) revenue pools across the themes which is distinct from and smaller than capex investment pools which apply across the lifetime of
projects. For example, the clean power revenue pool is estimated by taking the LCOE of renewable energy generation sources ($/MWh) multiplied by the
installed capacity by 2030, assuming 25 year project lifespan

Source: Energy & Climate Intelligence Unit- Net zero tracker, UNCC- Nationally Determined Contributions Registry McKinsey & Company 2
Li-ion battery demand is expected to grow by ~33% p.a. reaching 4.7
TWh by 2030, while most demand is concentrated in China (~40%)
2022 Q4 Base case

Global Li-ion battery cell demand by sector, Global Li-ion battery cell demand by region,
2020-2030, GWh 2020-2030, GWh Key insights
CAGR

~ 90% of demand driven

RoW by the mobility sector

~40% of demand to come

from the China market

Significant growth in US
& EU due to regulation
and localization

~18 x
growth in GWh
battery demand
from 2020 to 2030
1. Incl. Passenger cars, Commercial vehicles, 2-3 wheelers, off highway vehicles and aviation

Source: McKinsey Battery Insights Demand Model McKinsey & Company 3

Large growth of revenue pools along battery value chain expected
with revenue for cell production reaching USD 375 bn by 2030

Global value
added pool1 Raw material Active material Cell Battery packag- Recycling & Total value
USD bn and refining production production ing & integration second-life added

2020 10 15 25 30 <5 ~85

2030 100 250 375 450 10 ~ 1200

1. Each value pool calculation is irrespective of the previous value chain step (not cumulative)

Source: McKinsey Battery Insights, Securities research, Expert interviews, Yano Research, Press search McKinsey & Company 4
Fast growth of announced battery production capacity (CAGR 30%)
with increasing share of Europe and North America
X% CAGR, 2020-30 2020 2025 2030

Announced battery production capacities, GWh, 2020 - 2030 Key insights

Europe China Announced battery supply

1,240
35% 28% 4,170 reaching 6.6 TWh by 2030,
exceeding expected battery
726 demand (~4.8 TWh)

3,740 Fastest growth in production

356 capacity in Europe (CAGR
62
North America 35%) and North America
31% (CAGR 31%) driven by
807 localization trends
689

China to remain largest

Rest of World
54 producer of battery cells with
20%
share of ~60%, followed by
335 387
Europe (~20%) and North
61 America (~10%)

Source: McKinsey Battery Insights – Supply Model, Team Analysis McKinsey & Company 5
Localization of battery production is incentivized by different
regulations around the globe
Not exhaustive

Incentive Inflation reduction act Product Linked Incentive Access to raw materials
program (IRA) (PLI) (i.e., Nickel)
Description Provides subsidies to EV buyers, Subsidy for up to 50GWh of cell Limiting exports of large
given that a predefined share of production for participating domestic nickel resources (e.g.,
battery raw materials and battery companies. Amount of subsidy through export bans and taxes) to
manufacturing was done in the tied to share of domestic value incentivize local downstream
US or a country with free-trade creation and technical processing. Setting up local
agreement performance of cells (i.e., cell battery production in JV with
Additional tax credit for cell, energy density and cycle life) leading global incumbents and
module, and active material government owned battery
producers manufacturing in the US company

Sample
players setting
up production

Source: McKinsey Battery Insights, Press search, Team Analysis McKinsey & Company 6
 Confidential and Proprietary. All rights reserved.

Demand expected to accelerate in some Southeast Asian economies

post 2025; >125 GWh of cell capacity announced
Demand
Electric vehicles Battery energy storage systems

Battery demand1
(based on domestic mfg. of end use applications) Manufacturing capability
2022 critical mineral production, 2030 cell production, GWh
2022, GWh 2035, GWh ’000 MT (% of global production)3 (announced capacity) 4,5

0.2 Graphite: ~5 (<1%), Manganese: ~120 5

Vietnam 20 26
1.4 (<1%)
0.1 >100
Indonesia 22 6 Nickel: ~1,000 (37%), Cobalt: ~2 (1%)
0.2

Malaysia 0.3 8 21 Manganese: ~360 (2%) 15

0.1 4
Thailand 61 3
0.1

Philippines 0.1 <1 8 Nickel: ~370 (14%), Cobalt: ~5 (3%)

Other Southeast
Asia Manganese: ~250 (1%)

SEA total2 ~2 ~175

>125

1.EV demand is estimated based on company announcements on production plans, analysis of historic growth, customer demand, regulatory trends and EV cost projections in a current trajectory scenario. BESS demand is estimated bottom up
(for residential), least cost optimization for meeting power requirement, and company announcements on production plans; 2. Cambodia, Myanmar, Laos, Singapore, Brunei are excluded due to limited battery demand, mineral reserves, and
production output; 3. Thousands of metric tonnes (MT); 4. Based on company announcements where information on capacity output and start of commercial operations are known; does not account for delays and unrealized plans.
Excludes any unannounced projects / future developments as of Feb 2023; 5. Limited production across SEA in 2023 with the exception of Vietnam (2k MT cathodes)

Source: McKinsey Battery Insights, McKinsey Power Model, McKinsey Center of Future Mobility, IEA Southeast Asia Energy Outlook 2022, United States McKinsey & Company 7
Geological Survey, International Copper Study Group
Strong momentum from manufacturers, however 5 key success
factors needs to address their pain points
Not exhaustive Player type Foreign player Local player

Example of announced projects Manufacturer’s pain point Key success factors

Indonesia
Cells Mining, processing, cathodes, cells,
(10GWh; planned) recycling Scale of domestic demand: Only Early aspiration alignment at
selected countries have strong national level to go “all-in”
domestic EV market demand, driven
Thailand by government policy to sustain 1-2
Cells and modules Cells (1GWh) giga factories Government’s role in
(1GWh; planned) proactively initiating and
Export potential: Clear aspiration promoting policies that
to serve exports, however, poor stimulate demand and encourage
ESG standards may be a barrier manufacturing investment
Vietnam
Cathodes Packs
(2k tonnes) (5GWh; planned) Cost competitiveness: Selected End to end value chain
countries have nickel reserves and integration – to enhance cost
availability of upstream partners with competitiveness
established plan for upcoming refining
Malaysia capacity and tax benefits; however
Cells Cells limited talent availability, equipment Partnership development with
(capacity not announced; planned) (capacity not announced; planned)
suppliers, lack of infrastructure leads global players – allowing further
to higher costs. global market expansion and
operation improvement
Philippines Policy support : Room for
Packs improvement in policy development
Continuous policy evaluation to
(capacity not announced) transparency and a comparatively
ensure effectiveness of
lower world Bank score on ease of implementation
doing business

Source: Government announcements, Company announcements McKinsey & Company 8

 Li-ion battery demand is growing globally by ~30% CAGR 2020-2030, driven
by rapid electrification of mobility and increasing need for stationary storage,
expected to reach total market size of ~4,7 TWh by 2030

There is an increasing trend toward localizing battery value chain, reducing

the dependency of battery imports driven by subsidies (e.g., US IRA, Indian PLI
scheme) and securing privileged access to raw materials (e.g., access to Nickel
Recap of key in Indonesia)
messages
Battery demand expected to accelerate in some Southeast Asian economies
post 2025; >125 GWh of cell capacity announced from ~1 GWh today

Key success factors e.g. government's proactive approach and alignment at

national level, end to end value chain integration, partnership with established
players needed to be implemented to address manufacturers concerns on
scaling the battery production capacity

McKinsey & Company 9