How overcapacity in battery manufacturing can lead to a change in the gigafactory business model? According to a recent Boston Consulting Group report, global battery cell production could outstrip demand twofold over the next five years, leading to intense price competition and major pressure to cut costs.
The 30% Cost Reduction Challenge
Battery producers must slash conversion costs (costs minus materials) by up to 30% to stay competitive. The big question: how? The report outlines two primary approaches:
Retrofitting existing plants with new process optimizations
Building next-generation facilities from the ground up, integrating cutting-edge technology
The Electrode Tech Is The Key
The most impactful cost-saving innovations are happening in electrode manufacturing, including:
Continuous mixing – Increasing throughput 3x while eliminating buffer storage
Infrared drying – Cutting energy use and reducing drying time
Electrode dry coating – Eliminating solvents, reducing costs by up to 19%, but still an unproven tech at scale.
Self-controlled slot die systems – Using AI to optimize coating parameters and reduce waste
Yet, scaling these innovations from lab to full-scale manufacturing remains a massive challenge.
The Scale, Skills, and Formats
Startups and second-tier battery makers face three major roadblocks to adopting new technologies:
Scaling these innovations from lab to manufacturing - all of the above work fine in the labs but have so far not scaled successfully
Lack of expertise – Many new players lack the deep process knowledge required to scale these innovations
Uncertainty of future cell formats and chemistries – Committing to a single format (cylindrical vs. pouch) locks in 50-60% of equipment, making flexibility a key concern
Why Dedicated Electrode Facilities Make Sense
Now, what follows below are my conclusions and not those of the BSG. I see that the BCG report strengthens the case for separating electrode production from cell assembly.
✅ Bridging the scale-up gap – Small-scale dedicated electrode facilities (300-2000 MWh) can serve as an intermediate step between lab and mass production
✅ Training & know-how transfer – Partnering with experienced manufacturers helps startups navigate the steep learning curve
✅ Specialization for market needs – Dedicated facilities allow for tailored cell production, rather than forcing a one-size-fits-all factory model
The Takeaway
The arguments of NMC over LFP chemistries have dominated the lithium-ion debate for the last couple of years. In my opinion, this is a “smokescreen” debate, centrally irrelevant to the industry. Overcapacity will make efficiency the new battleground, and those who fail to cut costs, bridge the know-how gap, and adapt to uncertain market conditions risk being left behind. Regardless of which chemistry they choose.
📩 If you’re working on scaling up battery manufacturing or bringing new electrode innovations to market, reach out—let’s talk!