Demand forecasting feat. SMMT and Altilium

Speaker A: Hello and welcome to the Road to Net Zero, a podcast from the Advanced Propulsion Centre. My name is Clem Silverman and today we're going for a deep dive into forecasting and the APCs analysis of battery and component demand. We have some special guests on the POD today. Christian Marston, COO and founder of battery material recyclers, Altilium, and Matthew Croucher, SMMT's chief economist to give us their insight into how and why forecasts are useful to the industry.

Speaker B: We also have with us our uh,

Speaker A: very own Hadi Motsarzadeh, head of Technology Trends at the apc, to explain the reporting and how we might interpret it before we get stuck in. If you want to check out the latest quarterly demand report, it's available now on our website. Head to apcuk.co.uk and look for our knowledge base. So please enjoy this discussion. It can get quite detailed so do get in touch if you have any questions.

Speaker B: Off we go. Okay, brilliant. So I guess the first very simple question, Hadi, maybe if you can just do a 30 second introduction to what are these quarterly demand reports, um, and what is included in them and then um, Matt, maybe if you can just give us an overview of what kind of things that you look at in your day to day work. Um, similarly if you produce these kind of um, forecasting reports, how you approach it and then Christian, how you use these reports to um, inform your business decisions and what you look at going forward. So maybe we could start there. So Hadi, just tell us what are these quarterly demand reports and uh, how do you uh, research them and build them up?

Speaker C: So uh, we have been producing these quarterly demand reports uh since 2022. Um and the aim and the purpose of that initially was basically to track and to monitor changes and predictions in the demand for automotive uh, um systems vehicle manufacturing in this country and in Europe and at global stage. Uh, we do analysis based on um, pulling data from different databases together based on um, adding a little bit of intelligence and insight from our side, working directly with uh, OEMs and the automotive supply chain and battery supply chain and electric motor supply chain in the uk. So we add a flavor of our insight and foresight to that. It starts with uh, vehicle production forecast at global, European and UK stages and then it trickles down into individual components and subsystems like um, M major ones for transition from ICE vehicles to electrification and zero emission vehicles. So we look into batteries, um, and then we look into electric motors and then we trickle it down into individual materials level for Those subsystems.

Speaker B: So Matt, how does that compare to the kind of forecast that you work with to inform industry and policymakers at smmt?

Speaker D: Yeah we have two forecasts. One that we do on the market side which we do internally so um, you know based upon members views and that gives us the outlook for the UK new car and van markets um, short term. So it tends to be two years forward. And then we have auto analysis which produce for us uh, our production outlook and that is done twice a year, uh March typically November time and then that looks at the UK and European uh, light vehicle production and we also do a summer update just on the UK and that's based around when we have our half year production figures.

Speaker B: And so Christian, basically question to you is then you know you've got these various forecasts and uh, reports from different organizations but how do you use um, them and what data are you looking out for? Um, as the numbers sort of fluctuate a little bit every six months or so.

Speaker E: Yes. So uh, you know industry data and forecasts are a uh, foundation to how we can grow this business. We're a uh, scaling clean tech company building EV battery recycling plants to give the UK you know, low carbon raw materials for the electrified supply chain. So you know, reports from trustworthy and credible sources like the APC and smmt, uh, essential to us, you know, they shape our understanding of the market, help us to validate our uh, technology roadmap and importantly they're critical for us to engage uh, with investors, grant providers and policymakers. Uh so these um, you know, data points don't just sit in uh, slide decks um and funding discussion with investors. They inform multimillion pound decisions as to where do we locate plants, what capacity should we build, what materials to prioritize and when we should do that. So we're in tune with the high volumes of scrap coming from the adoption of EV in the UK and also gigafactory scrap.

Speaker B: So the government has just released their sort of, you could call it a stretch target of 1.3 million cars and vans produced in the UK by 2035. Right. Um, and the APC now is saying 1 million is the forecast demand. I think SMMT have a slightly lower estimate potentially. Um, does it matter when you're talking about a few hundred thousand either way Christian, to you or um, are you really attuned to those, um, to those, those headline numbers as it were?

Speaker E: Yeah, so I mean look for us what we see is that there's uh, an end of life uh battery challenge coming for the uk. Um, and also we have gigafactory production here. So all of that material needs recyc as well. So um, you know we're confident that basis, the regulation that we um, have the opportunity to take that end of life battery liability for the UK and domestically, you know, recover uh, the critical minerals to put them back into a new supply chain to build new batteries and give industrial resilience. But I think also to hit this ambitious target, the, you know, the UK can't rely on its current automotive OEMs. It must attract new EV manufacturers to invest and build in the UK and that requires the right environment, not only policy support and um, infrastructure investment, but also a competitive battery raw material supply chain. So you know we have some gigafactory projects um, already uh, here in the uk but you know what we need is the upstream investment in domestic production, a cathode active material or pecan, um, or other battery raw materials. And you know we have some of these materials already uh, in the UK such as the lithium projects in Cornwall. But uh, a truly scalable solution to support an automotive industry in the UK needs to include battery recycling. In a circular economy, um, we see that 50% of the critical minerals um, needed for a battery supply chain by 2040 can come through recycling. And at Artelium we've developed low carbon green processing technologies to recover those valuable minerals from old EV batteries and feed them back um, into a supply chain, reducing uh, dependence on um, importing materials and also it's more sustainable.

Speaker B: Yeah. Hadi, what are your views on that?

Speaker C: Uh, well, I think it's important just to recognize that we do have the ambition for 1.3 million um, vehicles uh, to be manufactured in this country. This has gone now into the government, uh, industrial strategy and uh, it's very positive message and it's a very positive signal to the automotive industry and to um, battery manufacturing and battery industry and all of the other components and battery supply and automotive supply chain as a whole. However, one of the things you would notice on our latest uh, published report which was published end of June, we are still seeing and it's still positive in terms of uh, the overall and the total vehicle production in Europe and in the uk but we are seeing a little bit more transition, um, transitionary solution as uh, we see more PF and hybrid vehicle coming to the market as opposed to fully electric vehicle as we had expected before.

Speaker B: Matt. Yeah, sorry, go on. So Matt, do you see similar sort of things seem to similar sort of challenges?

Speaker D: Uh, yeah, totally. I mean um, you know as Hadi said, it's really positive that there's uh, that ambition. Um, you know, the 1.3 million-plus, you know, is great to have that, you know, and hopefully that means that government is then rolling in and supporting with the necessary, uh, you know, conditions to have, you know, really competitive uh, offering in the uk, um, to attract that new investment. Because we definitely see that to get to those sorts of levels, um, you know, you probably do need somebody new coming in to the market, into the, into the UK to um, you know, help shore up that. I think, you know, there is potential to um, you know, have better capacity utilization at the existing plants. And then we've heard some of the, the volume manufacturers talking about you know, offering facilities um, to, to other manufacturers to try and boost volumes, et cetera. You know, hopefully we can all work together because you know, everybody wants uh, the to succeed and hopefully you know, by everybody pulling in the right direction, that can really come, Come good.

Speaker B: Yeah, I think so. The government's done probably three critical things really in the past few uh, months with the industrial strategy. Um, you know, you've got the investment in the, for capital and R and D and the manufacturing side, for production side. Then it's done something which I think maybe was unexpected with the incentives on the demand side. Um, and then also tweaks to the ZEV mandate policy, um, which industry was

Speaker A: asking for on ZEV mandate, saying that this might slow down the transition a little bit.

Speaker B: You're seeing more, you know, uh, hybrids and extension, uh, of that little bit more. Um. Christian, does that, does that affect the amount of end of life batteries and, and scrap that you're getting through? The fact we're getting fewer, we're gonna projecting to have fewer bevs on the road and therefore coming to the end of life at certain points. Or does that not really matter too much in the context of uh, what you're looking at?

Speaker E: No, I think, look, um, it's not a uh, material effect on um, the business. I mean we still see that electrification is happening. We still see strong regulatory support, um, here in the uk. Um, we also see that there are for example in Europe uh, the uh, battery regulation there that requires minimum recycled content in new batteries starting in 2031. Um, we also have what we call um, premature failure of end of life batteries which are essentially um, vehicles which have been written off by insurance companies sitting at scrapyards. So that volume is quite high and increasing. There's a real issue that batteries cannot go to landfill. Um, and right now the UK shreds end of life batteries and that material is being exported out of the uk. So essentially we're exporting jobs, critical minerals, um, and value and then we have to buy those material back to bring into the UK to put the material back into a gigafactory. The mandate is there. So I think that's still uh, a positive uh, trend. There is still growth, smaller growth, but it's still growth.

Speaker B: Yeah. And I think that's what comes out in these reports, isn't it? How do you still see in growth? You're still seeing the demand being there.

Speaker C: The end goal and the end target hasn't changed, it's just a pace towards that which is changed slightly. It's going from a strength to a strength I think have a good uh, forecast for manufacturing of batteries still in the, in the Europe and in the uk. Uh, so it doesn't change the recycling, um, uh, industry and the recycling landscape. I don't think it does.

Speaker D: I think um, you know, we've still got some challenges ahead. I think, you know, our outlook is probably a little bit more pessimistic than APCs in the short term. Um, you know we do see real challenges there but you know, government has put um, you know, a number of measures in place. Hopefully, you know, they are beginning to move the dial. I don't think they fully resolved the issues but they're certainly moving it there. And things like, you know, those trade deals are really critical as well. You know, you have to remember that 80% of what we produce we export. And so, you know, those export markets are really important to us and therefore to overall volumes. And you know, you've got this critical mass of manufacturing in the uk. You can't really afford for that to slow down any further because. And that has major impacts on the supply chain and you want to be building things up. The transition is really challenging. You know, a lot of the times the plants have to, you know, stop producing for you know, many months, um, you know, while they transition lines over. And that is a very expensive thing to do. And so having everything in the right place, um, you know, to ensure that production is going to be um, able to recover and pick back up again. And then having the demand levels, having the access to trade, having those good trade deals in place, you know, really critical to all that. You need everything in place to make it succeed. And the government, you know, is certainly moving the dial. Um, and that's positive.

Speaker C: And can I just add another thing then on that, that's on the trade side, on the technology side as well. Um Clem, I think the thing we are seeing is battery manufacturing outlook is still looking positive. Ah with increased focus on the. On uh, low cost, um battery manufacturing, um, battery types, battery chemistry.

Speaker B: Yes Y.

Speaker C: We have seen this transition now uh with many OEMs in Europe, high volume, um manufacturers moving uh from uh nickel region and AMC chemistry towards lfp. And when that plan is kind of solidified and when their plan is in place then we will see um, more increase in the um battery manufacturing um um and battery supply.

Speaker E: Can we talk about can cathode active material?

Speaker C: I think it's important we talk about the battery components and then um, slightly go down to materials level. Clem, if you don't mind talk about that a little bit and I'm gonna have hand over to you Christian. So the other part we cover on our quarterly demand report as I mentioned is basically um, trickle down the vehicle production and vehicle demand forecast into um, battery demand and then battery component demand. In that respect we look into uh cell production and then cathode active materials and anode active materials and electrolyte and separator as key components of uh batteries. And then we look at the uh European supply chain status and UK supply chain, um, latest updates and latest news on. And then we provide a supply chain analysis with regard to what is needed, what is the demand versus what is the capacity in Europe? Um in 2027 and 2027 we chose that date because of rules of origin which is impacting the way we are manufacturing and we are importing materials and putting it into battery Systems in the UK and in Europe. So 2027 and then 20 and then 2035 we look at capacity versus demand for Europe. So on that note Christian, do you want to add your views on that?

Speaker E: Yes. So um, you know cathode active material we see is um, probably the most valuable part of the battery. It determines the performance, the energy density, you know it's, it's the highest value component and also the carbon footprint of the um entire battery pack. So you know without UK based can production we remain you know heavily reliant on an overseas supply chain, predominantly China, you know, increasing um, the geopolitical risk. You know if we look at the APC forecast, you know the UK demand for CAM will grow significantly from 2030 to 2035. So this is a major opportunity um for a domestic industry. And I think importantly if we look at um, the planned projects in the UK and the European region, they're actually minimal. So you know we could have the um, supply chains um, as well as the whole industry um slowed down um because of the rules uh, of origin and requirements for um, local material. Our view is that uh to attract gigafactories and automotive OEMs into the UK you need the battery raw material supply chain and the P cam. And the CAM is a key part of that.

Speaker B: Matt, do you have a view on, on that as well?

Speaker D: I mean I was just going to say that um, you know I find that's quite a useful aspect of the quarterly demand report. You know having this sort of breakdown um, you know and having the costs and having the technology, um, almost like roadmap of where things are moving to. You know that, that is a level of detail that you know we do look to people like APC to um, provide insight on. So you know that is really useful. As Christian said, you know, once you've got it here, you know, keeping it here and reusing it and making best use of it and if that then can make um, you know, the product um, you know lower cost and um, you know, greener then you know that's a win win. So that's really positive. And you uh, know I think that should be really uh, commended and um, sought for.

Speaker B: Okay, so to avoid giving myself even more of an editing job, you know we covered quite a lot already but is there anything else you wanted to mention? Any closing words that you'd like to give? Shall we do a round? So Hadi, you know what's what the question for you is um, what are we going to look out for in the next quarterly demand reports and you know, what can people expect um from the next round of forecasting?

Speaker C: I think for the time being we are um, basically going to continue in the current format and the current structure of reporting on data, uh, um, as I said splitting and um, putting quarterly demand report in these two, in these three sections, battery demand, powertrain split and then electric motor demand and then looking into um individual technologies and individual um chemistries and materials and type of uh technologies going into each of these three buckets. Uh, we are going to continue on that. One of the things we um, talk on a regular basis with our colleagues at SMMT is building more alignment around that vehicle production forecast and having different scenarios in place to um, support um, UK level and government level as well as um, automotive council level kind of strategy on investing in technologies and investing in OEMs and capital, um, moving forward. So um, Matt, is that something you're

Speaker B: expecting from Haddie or is that, I

Speaker D: mean you know I mean we're, you know, we've increasingly started working together. Um, you know we see the benefits of working together, um, you know, and getting, you know, better information, sharing better insights, um, you know, and so ensuring that you know, we're getting, you know, not like a group thing but you know, at least we're sort of, we've got different ideas, we've got different um, you know, attributes of knowledge, uh, E.T. and so trying to pull all those together to um, give better, more accurate outlooks, um, you know, the different scenarios. You know, we do scenarios um, because you know, it's just much more challenging at this point in time to um, you know, do forecasts. There's so many variables going on, um, you know, big changes, the geopolitical, the economic, um, and then you've got, you know, that sort of massive transition underway does make it really challenging. Um, you know it is, I think at the moment volumes have been more constrained than we might have hoped for. Um, we're expecting volumes to remain quite constrained in the near term. Um, but the hope is that given some of the positive signals that government is giving with the industrial strategy, the trade deals and now the um, consumer grant, um, to support the transition that can step the industry in the right direction and help make the UK more attractive to produce in and get volumes up. No doubt we do have to go further faster and we've got real short term challenges. Hopefully we can overcome those and deliver the growth and the green growth that everybody really wants.

Speaker B: Yeah, brilliant. Yeah, that's a nice positive uh, note to end on. Christian, do you share that sentiment?

Speaker C: Yeah.

Speaker E: And uh, look, I think as final, um, final comments, we'd like to thank um, you know, the APC and uh, SMMT for um, the industry reports and uh, forecasts. You know, they're really valuable for companies um, such as Altelium, uh, as we um, you know, scale and support the UK's uh, electrification with the you know, sustainable battery raw materials. We see some headwinds but essentially we still have growth, we're still positive to electrification in the uk. I mean we see that um, for battery recycling the UK is a very unique market where we're an island. We have relatively high adoption of EVs compared to other territories. We have gigafactories, we have the largest secondhand car market in uh, the European region. So ultimately there's going to be, and we have battery energy stationary storage. So there's going to be with this energy transition, high volume volumes of lithium batteries which need recycling. And you know, we're building that, um, you know, we're developing the green processing technologies and building the infrastructure to support, um, the UK with battery recycling infrastructure.

Speaker B: Fantastic. Thank you very much and thanks everyone for your time today. Um, it's been really good to talk to you and hopefully, um, we'll speak again soon.

Speaker C: Thank you. Thank you for running it. Thanks, Matt and Christian.

Speaker E: Yeah, thanks, Hadi. Thanks, uh, Matt and thanks, Ben.

Speaker C: Bye.

Speaker E: Bye.

Speaker B: Brilliant. Thank you so much.

Speaker E: Bye.

Speaker A: Yes, and thanks once again to Christian, Matthew and Hadi. And thank you for listening to this discussion on demand reporting and wider context of the EV supply chain in the uk. If you want to know more, head to the APC website, sign up to our newsletter if you haven't already. And look out for future insight from

Speaker B: Hadi and his team.

Speaker A: Thanks once again for listening.