In the last post, we discussed the technical and logistical challenges when building a gigafactory, and their impact on profitability. In this post, the final in the series, we’re going to discuss how to properly monetize battery manufacturing.
In presenting these many and daunting challenges to starting up a new battery factory, we by no means wish to discourage anyone. With global demand for battery cells skyrocketing, there is a massive and lucrative opportunity for companies that get it right — and many will. In this section we’ll lay out some keys to success for getting to full production scale quickly, and staying there profitably.
The key is speed!
As mentioned earlier, the primary lever to reaching profitability in battery manufacturing is getting to the self-funding point, and then to breakeven on the overall investment, as quickly as possible. But let’s break down what this means in practice.
In simple economic terms, breakeven means the total revenue on all the batteries you sell matches or exceeds the variable costs associated with making the cells (mostly materials inputs), plus the overhead of running the factory (people, utility service, building maintenance, etc.).
And how do you maximize profit? By making as many cells as possible with sufficient quality to sell them to someone else. Let’s again revisit the concepts of throughput and yield, the key drivers to battery manufacturing profitability.
These two are often intimately linked. As you refine your process to improve yield (and can thus make an increasing number of good cells relative to what you lose as scrap), you can ramp up throughput a bit while further refining the process to ensure yield is maintained. This process repeats iteratively on the path to full production.
Revenue (and thus profit) is ultimately a function of throughput multiplied by yield percentage. The challenge boils down to maximizing both throughput and yield simultaneously. If you run your production line at maximum speed, but have to scrap too many cells that fail quality control, your plant will not be profitable. Conversely, if you have great yield but have to slow down your production line to achieve it, you’ll again fall short. If you get both right, your cash flows will turn positive and stay there. Let’s have another look at one of our earlier charts to get a feel for how doing so directly impacts profitability.
On this chart, the path highlighted in green illustrates the potential benefits of accelerating production ramp, namely:
And likewise, let’s take one more look at the more financially oriented chart to observe these impacts in terms of payback on investment.
Here you can see how ramping up throughput and yield faster gets you to self-funding and breakeven sooner, meaning you can raise less money for each factory, and enjoy greater profitability over the long run.
The key to speed? Enterprise Battery Intelligence!
You’ll see on these last two charts that the more optimal green path is labeled the “EBI-enabled path”. EBI here stands for Enterprise Battery Intelligence, an emerging category of data infrastructure and analytics software specifically targeted to helping battery-powered businesses achieve profitability and success in the marketplace.
In a battery manufacturing setting, an EBI system provides an analytics layer that automatically aggregates data from across the production line — materials batches, equipment setpoints, formation cycling, and end-of-line quality control information — applying battery-specific analytics to make key correlations and actionable insights instantly available across your organization. This capability brings a range of benefits to a battery manufacturer.
An EBI system will integrate with and run alongside your existing tooling (MES, formation data capture, etc.) so that you can be up and running quickly, iterating toward success. Ultimately, this level of data agility and depth of analysis is a table-stakes requirement for any company that manufactures batteries today, or plans to in the near future. As the company that pioneered EBI, Voltaiq is proud to work with a number of companies at various stages along this battery manufacturing journey. We’d love to learn about your challenges and see if we can help. Give us a call!