Welcome. It's our pleasure to welcome so many of you here with us today in Seoul. Also welcome to those who are joining us via webcast. My name is Evlyn Kovacs. I'm in charge of Investor Relations.
And before handing over to the management for the presentations, I would like to go through a few practical things as well as walk you through the agenda of today. As always, a cautionary statement. I'm not going to read it for you. It's also on our website if you would like to consult it. Let's now move to the agenda.
Powering ahead. You will have noted the team already, and it is that is exactly what we want to showcase today. Umicore is powering ahead and is leading the way in clean mobility. Our CEO, Mark Greenberg, will kick off today's presentations. He will start with strategic update on Horizon 2020.
He will reflect on the achievements made so far, and he will also highlight the key megatrends that are strengthening and that are driving our key businesses, in particular, the accelerating move to clean mobility. We then move further to Pascal Remondet, Executive Vice President, Catalysis. He will talk about the unprecedented growth opportunities in Automotive Catalysts. Strengthening emission norms for both passenger cars and heavy duty diesel are driving growth in the market, and he will demonstrate that Umicore is set to outgrow the market. After a break, we continue with Kurt van der Putten, Senior Vice President, Rechargeable Battery Materials.
He will explain that Umicore is widening the gap in battery materials for XEV applications, and he will explain that this is driving significant growth for Umicore in the years to come. After a longer break for lunch and also a cultural activity, we will continue with Denis Gofot, our CTO and Executive Vice President, Energy and Surface Technologies. He will walk you through the innovation roadmap in Clean Mobility Materials and highlight the unique position of Umicore on every step along that innovation pipeline. We will then go back to Mark, who will wrap up today's presentations with some key messages. That is also when we will stop the live webcast.
Those of you who are here with us today will then be invited for dinner and will also have the opportunity to attend the keynote of Chancellor Professors Materials Science and Engineering, Gerbrand Seder, who will talk about the future of energy storage and electrified vehicles. We have a very, very busy agenda. So a busy schedule. We are very anxious to get things started. But just a few practical things before we can start it.
We have foreseen official Q and A sessions. In order to give everyone the possibility to raise their questions, may we ask you to limit your question to 1 question per person. We will be showing all the presentations that we will be showing today will be posted as well on our corporate website every time at the end of each session. Please note that today's event is being recorded and that the replay will remain available for 5 years on Umicore's website. And then last but not least, may we ask you to switch off your mobile phones?
If you decide to tweet about the event, don't hesitate to mention our hashtag UmicoreCMD. And with this, I would like to ask Marc to come on stage. I wish you a very, very enjoyable day. Thank you.
Thank you, Evelyn, for this very thorough introduction. Good morning, everyone, and welcome to Umicore's Capital Markets Day in Korea. If you attended our Capital Markets Day 3 years ago in London, welcome back. And if you attended our Capital Markets Day 6 years ago, I'm glad we gave you a good reason to come back to Korea. And of course, I would like also to welcome our web audience today.
We have prepared a very full program for you for today and for tomorrow, a program that is articulated around the theme of clean mobility materials. And the one of the key things that we want to bring across as part of the program is actually we want to highlight how technology and environmental regulations are driving the growth in our business. What we would also like to highlight during the program is what has changed compared to the Capital Markets Day of 3 years ago when we launched our strategic plan Horizon 2020. Before doing so and before highlighting those changes, I would like to go a little bit in back in history. Actually, I would like to bring you some 15 years back in history and that in order to put the strategic journey of Umicore in somewhat of a good context and perspective.
So 15 years ago, we started to drastically transform the portfolio of Umicore, And that was done through intensive M and A activities. 15 years ago, we acquired the Catalyst activities that are one of our flagship activities and one of our largest activities today. And we also started the divestment process of the historical activities of Umicore in smelting and refining. At the same time, we were rolling out the recycling business model, and we were also starting to plant the seeds for some organic developments. So a very intensive phase of transformation for the group and, as I mentioned, driven or executed to the very large extent through M and A activities.
After that, we decided to put much more focus on the organic growth potential of the company. And as I mentioned, we had planted some seeds for organic growth. And during the year 2010, 2015 time frame, we started to make choices. We actually started to make selections and invest in those activities, those seeds that have developed the best and were showing the best promise. At the same time, we also decided to put some more investment on the ground in those activities and prepare for the next phase.
So M and A transformation in the 1st decade of this century, followed by a more significant focus on organic growth. And then when we met 3 years ago and we launched the Horizon 2020 strategic plan, I told you that we would seek a somewhat more balanced approach. Of course, the focus would still be on organic growth, but we would that we would I told you that we would want to complement the organic growth with some selected M and A activities. Having now passed the halfway mark of Horizon 2020, I can actually comment a bit more as to how things have developed in reality. Over the past 3 years, we have really spent significant efforts to change the configuration of Umicore and to simplify the configuration of Umicore.
First of all, we have streamlined our portfolio of activities. You will recall that early 2015, we announced that we wanted to streamline the portfolio of activities in order to increase the focus on clean mobility materials and on recycling. That is by and large done by now. In 2016, we divested our zinc chemicals activities. In 2017, we divested Building Products and the Large Area Coatings activities of Thin Film Products.
And earlier this year, we sold the European operations of Technical Materials. So all in all, over the past few years, we reduced the number of business units from 15 to 9, and we reduced the number of production sites from 64 to 51, so quite a significant simplification. During the same period of time, we achieved we completed some selected acquisitions in Energy and Surface Technologies and in Catalysis. These acquisitions were meant to strengthen our positions, our market positions or strengthen our technology offering. In Catalysis, we acquired the remaining shares in our Korean joint ventures that is producing automotive catalysts, ORDEC.
We also acquired the HDD and the stationary emission control catalyst activities of Haldor Topsoe. And we acquired the metathesis catalyst activities of material. In Energy and Surface Technologies, we acquired a very critical IP portfolio a few years ago, and we also acquired French company Euro Tungsten. At the same time, during the past 3 years, we stepped up and accelerated our investments in rechargeable battery materials in quite a considerable manner, and we'll have a chance to come back to that and elaborate on these investments and how we step them up. As a result of that phase of the past 3 years, we have now a new Umicore, if I may put it this way, with a very clear and much sharper focus on clean mobility materials and on recycling.
We have also used this period of time to build very strong foundations on which we can actually that we can use to accelerate the growth of our business going forward. And that is what we will see next. So more organic growth actually as a result of the previous phase of preparation and a very, very significant acceleration of that growth. Talking about foundations, there is one thing that has not changed at Umicore and these are our foundations. Our foundations are exactly the same as 3 years ago when we talked about them.
They are the same as 6 or 10 years ago. This is the common denominator across our businesses, and it is also the basis on which we make key strategic decisions. Our business model consists of transforming metals into functional materials and to actually using we do that using a blend of competencies in chemistry, in material science and in metallurgy. And actually, we are strongest in those areas where a combination or all three types of competencies are required simultaneously. We differentiate ourselves through a very deep application know how, and we differentiate ourselves by closing the materials loop.
Also a very significant part of our foundations is our approach to sustainability. We are and we act as a leader in sustainability. And at Umicore, I would like to emphasize that this means more than trying to minimize the potential negative impact that industrial operations could have. At Umicore, as part of our sustainability leadership, we are striving to have a positive impact around us by using our technologies, using our competencies to address a certain number of societal challenges. And this is reflected in the way we select our businesses, the businesses that we want to pursue and in which we invest.
It is also reflected in our mission statement of making materials for a better life. Megatrends that are actually the underlying factor behind our strategy and show you why the megatrends that were selected a number of years ago to support the strategy are still very relevant and even have strengthened over the years. Let me start with what I believe is the most obvious case, that's resource scarcity. Why obvious? Well, because mineral resources are available on earth in finite quantities.
So as we dig them from the ground, by definition, their scarcity can only increase and so in a way will the need for recycling. What we observe though is that over time, the perception of what is scarce may change and may move from one element to the other. I recall that when we spoke about that some 6 years ago during our Capital Markets Day here in Korea, what was hot on the agenda was the availability of rare earth and that was following the introduction of export quotas by China. 3 years ago, the question mark was about the availability of lithium as we saw the first sign of emerging demand for battery materials for electrified vehicles. And now the spotlight has clearly moved to cobalt.
So scarcity increases, the need for recycling follows and the elements which are perceived or which are actually scarce can change over time in function of market, regulatory or technology developments. There is another megatrend that has also strengthened in recent years, and that's the need for cleaner air. And one of the catalyst factors in the recent past that has changed the perception about the need and the urgency to make the air cleaner is no doubt the diesel scandal. And as a matter of coincidence, you may recall or you may have noticed that the diesel scandal broke out in September 2015, just a matter of days after our Capital Markets Day back in London. And the diesel scandal has done a few things.
It has changed the perception in the public opinion, and it has also reduced quite dramatically the tolerance for pollution, not only in the public opinion, but also in the regulators' eyes. And as a result of that, you have seen an accelerated introduction of tighter emission norms. And for the first time, some of these norms will be applicable in real driving conditions, which and we will explain that later actually, Pascal will explain that later, which will boost actually the value of the catalysts that are required per vehicle. The other thing that has changed following the diesel scandal is that the regulators have decided to raise taxes on diesel fuel. And if you take the combined effect of tighter emission norms and more catalysts or more sophisticated catalysts being required for cars because of that and the increase of the fuel costs because of higher taxes, and I'm talking about Europe, the effect is that diesel engines have become less competitive and less affordable, in particular, for compact cars.
I've already mentioned what is on the slide now, the fact that for the first time, the new emission norms will be applicable in real driving conditions, and that will have an effect on the catalyst value. Another thing that has changed and that's a recent trend or recent strengthening of the trends for cleaner air is that you have seen a certain number of municipalities considering or announcing bans on diesel. So a certain number of municipalities do no longer want to have diesel cars in city traffic conditions. And if you consider that diesel will become more expensive, diesel configurations will become more expensive in Europe and that there is an uncertainty now as to whether you will have the authorization to drive your diesel car in city centers, you can infer from that that these factors are keeping quite a number of consumers away from diesel today, and that explains the declining sales of diesel cars in Europe. As a result of that, we have recently seen a series of announcements from leading global car OEMs such as Nissan, Toyota and Volvo that they would stop developing diesel platforms and that they would seek to accelerate their exit from diesel sales.
If you take another leading car manufacturer, Volkswagen, while they decided not to abandon diesel, at the same time, they clearly decided to step up and accelerate significantly their electrification strategy. The other key development that actually took place shortly after our Capital Markets Day of 3 years ago was China's decision to introduce China 6 emission standards, much tighter emission standards, both for passenger cars and for heavy duty diesel applications, and that implementation will start in 2020. Later today, we will show you how this is going to impact the value of catalysts per car and how this is going to impact the value or going to boost the value of the catalyst market. It's also worth noting that the emission norms that China is going to introduce shortly are going to be tighter than those that we know in Europe. And China has been a follower in terms of emission norms for quite a number of years and have decided to now leapfrog what others are doing and to lead with the tightest emission norms.
You can also say that this is normal because the air quality problem is much more acute in China than in any other region. Also worth noting is that India decided to follow suit. And while the Indian market is somewhat smaller than China, this is also a significant development. If you consider that China and India together account for some 35% of global car production and about half of the heavy duty engine production, you can imagine what effect this will have on the global market. So all in all, this is leading us to believe that the growth in the catalyst market is going to be much more pronounced than what we felt 3 years ago when we started when we launched the Horizon 2020 strategy.
Historically, we have told you that the catalyst market was growing at about 1.5 times the rate of car production growth, and it was not a linear growth, of course, because it was depending on a few steps achieved at the time of the introduction of new norms, but that's been the historical average. With what is happening in Europe, what is happening in China and in India on the passenger car side and for heavy duty, you will see now a much more pronounced growth going forward and actually in the not so distant future. At the same time, we also see a very significant acceleration of the electrification of car production. So this is actually not so new compared to what we discussed 3 years ago at the time of the Capital Markets Day in London because actually the main regulations that are driving the introduction of electrified vehicles, that is the CO2 regulation in Europe and the CO2 regulations in China, those regulations were in place in 2014 already, so before we launched Horizon 2020. However, what has happened in the recent couple of years is that there has been an acceleration of the electrification and a step up of the electrification efforts of the car OEMs.
In China, which is the leading market in terms of electrification and which probably account for more than 40% of global EV demand going forward, in China, the acceleration is pushed by the government that has recently introduced EV or new energy vehicle production quotas over and above the subsidy mechanism that was encouraging already the adoption of electrified vehicles, you have now a much stronger regulatory push and a much stronger government mandate to introduce electrified vehicles in the marketplace. In Europe, the push is coming from the fallout of the diesel decline, which will make it even more challenging for carmakers to achieve the 2021 CO2 regulations and new limits in Europe and will force them to increase the proportion of electrified vehicles in their model lineup. Now when we met 6 years ago for the Capital Markets Day in Korea, clearly, there were more skeptics at the time than believers in electrification. And the question at the time really was, will electrification ever happen? The question was sometimes expressed in another manner.
The question was sometimes expressed by the skeptics mostly in the following way. Where does the oil price need to go in order for electrification to make sense? And some people, some observers were saying below $200 per barrel, electrification will not make sense and therefore will not happen. That was 6 years ago. And if you were an early adopter, it is also true to say that you had a limited choice of EV models on offer at that time, which was not really creating the best conditions for EV models to penetrate the market and to convince the skeptics.
When we met 3 years ago in London and when we're launching the Horizon 2020 strategy, the question no longer was will electrification ever happen. The question at the time was how fast will it go because regulations have been adopted. And so there was a clear indication or more than indication, there was a confirmation that electrified models would be required in a certain proportion in order for car OEMs to be able to meet the new and more stringent CO2 limits. At the time, some models were developed to try and simulate what was the required reduction in battery costs to make battery electric vehicles or plug in hybrid vehicles competitive with combustion engines. And I think that has occupied many of you for quite a while.
And at the same time, I have to say that and you will see that also from the images that we're projecting now, the number of models on offer had been multiplied quite substantially. And still for the early adopters, clearly, you had back then 3 years ago quite a number of models to choose from if you wanted to make the effort, the financial effort, to acquire an electrified vehicle. Today, I would say that the question no longer is how fast will electrification happen. The question really has become how much faster can it go. You see a proliferation of models that are being offered.
And actually, this will even be more visible next year in Europe. Why next year? Because next year, the credits that the European Union is giving to car producers for electrified vehicles are starting to accrue, while the potential penalties, if you don't meet CO2 regulations, will only start to kick in, in 2021. So that's one factor. The other thing is that clearly the perception of the urgency of improving air quality has really changed in recent times.
So the question today, as I mentioned, is how much faster can it go. Having explained why the megatrends that are supporting our growth and supporting our strategy horizon 2020 are still relevant and have even strengthened, let me now now go back to the objectives that we had set ourselves as part of Horizon 2020. And let me start with the financial part of these objectives. You will recall that 3 years ago, we told you that the as a result of the growth and the organic growth that we had in mind that we would double the recurring EBIT by 2020 starting from the 2014 base excluding discontinued operations. So at the time, the rebit in 2014, excluding discontinued, was slightly over EUR 240,000,000, which meant that we were expecting to reach EUR 500,000,000 in recurring EBIT by 2020.
I'm pretty sure that you will recall what we communicated in February at the time of the full year earnings release and at the time we launched the our capital increase. And you will also recall the guidance that was provided at the end of April, which basically means that we now expect to reach the Horizon 2020 target or to even exceed it as early as this year, so 2 years ahead of schedule. And the faster growth that we see in Energy and Surface Technologies And the fact that we've been able to accommodate the faster growth of demand and to accelerate our investment now means that we see a potential to exceed the original Horizon 2020 target by some 35% to 45 percent. I also told you 3 years ago that as a result of the faster growth in Energy and Surface Technologies compared to the Catalysis and Recycling segments that by 2020, we would have rebalanced the contribution to earnings from the 3 segments. As a matter of fact, this rebalancing was achieved in 2017 already as a result again of the faster than anticipated growth in battery materials.
And with the investment program that is in place and where we see now demand heading, it is fair to expect that by 2020, the Energy and Surface Technologies segment will have become the largest contributor to earnings. Let me now address our sustainability objectives as we set them out back in 2015. And there again, I have to say that we have achieved very, very significant progress. In terms of eco efficiency, in the first instance, configuration, we have achieved significant improvements. For instance, we have reduced our energy consumption by 20%, more than 20% compared to the baseline of 2015.
We have also reduced our metal emissions to air and water by, respectively, 41% 69%. This is the result of significant investments that were made in our largest facilities and significant projects that were successfully achieved in order to make our facilities way more eco efficient than was the case. And again, still with the idea in the back of our minds that we want our operations to be benchmark in the industry. Another area where Umicore is creating distinction, competitive distinction is in the area of ethical and sustainable sourcing. Actually, some more than 10 years ago, back in 2,005, we decided to introduce an ethical and sustainable sourcing charter and to impose it to all of our raw materials suppliers.
I have to admit that we have hardly been rewarded for that so far, but things are changing. Things are changing because there is an increased level of scrutiny by the public opinion, by the NGOs and by leading customers in the automotive and the electronics segments about the origin of the raw materials going in their into their products. And this is a trend that we're building on to play out our competitive advantage and our early positioning in that respect. Early positioning, for instance, I have to say that Umicore was the 1st company last year to obtain 3rd party certification that our cobalt supplies are 100% of ethical and clean origin, which in today's environment and high scrutiny environment clearly positions Umicore quite apart from the rest of the industry. And next to that, of course, we have our closed loop or recycling capabilities, which offer our customers full traceability.
So this is one of the key distinctive factors in our business model. And when we talk about making or turning our leadership in sustainability into a greater competitive advantage, this is, I think, one of the best way to illustrate what we mean with that. Now let me briefly show a few examples selected examples of how we are establishing or strengthening our leadership in clean mobility materials and recycling. Short examples and selected examples because actually this will be developed in way more detail and depth by my colleagues during the rest of the program today. Let me start with recycling.
And actually, I have to clarify in the first instance that you will not have and you may have noticed that from the agenda that Evelyn presented, you will not have a fully fledged presentation on recycling today. It doesn't mean that we have a lesser interest in recycling from a strategic point of view. It's just that we wanted to focus today and tomorrow on what has changed the most since we spoke last in September 2015, and that is in the area of clean mobility materials and in clean mobility materials, in catalysis and in battery materials. The interest and the willingness to develop our activities in Recycling are totally unchanged compared to 3 years ago. Our leadership in Recycling hinges, I would say, in the short to medium term, mostly on the capacity expansion of our flagship operation in Hoboken.
The ramp up of the new capacity is proceeding well. And as I mentioned to you on a few occasions in recent communications, the results of this ramp up should become more visible starting this year, more visible in terms of financial impact. While we will not focus on recycling today and while the growth profile may not be as sharp as it is in Catalysis or in Battery Materials, I would like to repeat and I would like you to continue to bear in mind that our recycling activities generates outstanding returns and has an extremely attractive cash flow profile. So nothing to be read between the lines. We'll not talk a lot about recycling today.
It doesn't mean that we have less interest from a strategic point of view. And of course, I'll be happy to take your questions on recycling during one of the Q and A sessions. I've talked about the leadership in recycling in the short to medium term. In the longer term, what we see as the next big thing is, of course, the recycling of spent lithium ion batteries. It will take a bit of time to materialize as a new business.
I still expect that this business will take off in the mid-twenty 20s and that it will have a growth curve that is likely to mimic the growth curve in battery demand that we see today with a time lag of about 10 to 12 years, which means or implies that we are likely to make investment decisions to scale up our recycling capacities and capabilities sometime in the 1st part of the next decade, in the 1st part of the 2020 of the 2020, sorry. In Catalysis, we're also strengthening our leadership position, and Pascal will elaborate on that. I'd just like to highlight a few things, and I've selected as a picture, as an image, the tech center of AUDEC, the research and tech center that you will visit tomorrow as part of the visit program. That's an acquisition that was achieved that was completed in the 1st part of last year. We had a 50% stake in that Catalyst joint venture, and we moved to 100% and with a full integration being done in the meantime.
We also acquired the HDD and the stationary business of Halder Topse in the course of last year. This will strengthen our technology offering in HDD and in particular in China, which is set to become the largest HDD market in the world. And it's also giving us an entry into a new segment for us. That's the DNOX segment for some stationary applications such as power stations. Pascal will also show you later today how we are strengthening our market position in the passenger car segment with very significant leadership technology leadership in gasoline applications.
And I will say even less about the battery materials because this will be highlighted today during the presentation and tomorrow during the visit in Shionan. And what I told you 3 years ago is when we presented Horizon 2020 is that we would make use of the time window of Horizon 2020 to increase the gap in battery materials. And today, what I can say with a lot of confidence and what I think you will see today and tomorrow is that we have done so. That's what is really happening these days. We are increasing the gap, And we continue to qualify for large platforms in the Automotive segment, and we continue to add capacity much faster than anyone else in the industry.
As I would like to remind you with the some of the press releases that were issued recently and that outline the pace at which we're adding capacity and which imply that we are actually outpacing the market growth in battery materials. And clearly, with the visit tomorrow in Chang'an, you will get a visual impression of what we mean when we talk about building scale in this battery materials activity for electrified vehicles. As I get near to the end of my introduction, I would like to reuse a slide that I showed you 3 years ago at the Capital Markets Day in London. Why do I want to reuse it? Because it is still very much relevant.
And what I told you 3 years ago is that Umicore was uniquely positioned to serve the move to cleaner mobility in the automotive industry. And today, this is as true as it was 3 years ago. It is even more visible, I believe, that Umicore is in that unique position. We're the only company that is actually offering the entire spectrum of materials technologies to support cleaner mobility the cleaner mobility transition, be it through catalysts for combustion engines with gasoline particulate filters, for instance, now becoming necessary in certain engine configurations, be it through our materials for plug in hybrids or electric battery electric vehicles through the catalysts for fuel sales applications. And please bear in mind that we're also the only company that is closing the materials loop and offers the customers in the automotive segment that want to have a true clean solution the ability to recycle these materials that are used in drivetrains when they reach end of life.
The other reason that I wanted to show you again this image is to outline once again that at Umicore, this is not an aspiration. This is who we are today. So we are indeed already offering the full spectrum. And given the changes that we constantly see in engine mix, in drivetrain mix for a number of reasons. I'm convinced more than ever that our versatility and our ability to cover the entire spectrum is going to play out in our favor.
How is it playing out? Well, as I mentioned, there are a lot of changes in the engine mix. And if you remember the discussions that we had 3 years ago at the Capital Markets Day or even a longer time ago, quite a number of assumptions in terms of engine mix trends have had to be revisited since then. The first change that we've seen, and that's a recent change, is that there is a reduction in the engine mix, and that's a trend, a clear trend. There is a reduction in the proportion of diesel sales in the engine mix.
A second change compared to the assumptions that were made 3 years ago is that there is more electric, more electrified drivetrains in the engine mix now, and the trend is going to be even more pronounced going forward. Another change in terms of assumptions is that a number of car OEMs have started to narrow down the number of development avenues, while until recently they were keeping all options open, all kinds of combustion engines, fuel cells, electrified drivetrains and you name it. Today, they are starting to narrow down their options to a more limited number of choices for cost and efficiency reasons, but also because the urgency to meet the new CO2 regulations is actually pushing them in that direction. As a result, we see car OEMs streamlining their development programs and coming up with a reduced number of platforms that are open for bidding, but these platforms are each much larger and covering a larger number of models and a larger number of cars. So every time we bid for a platform, there is a lot at stake in terms of business development.
The good news about that as well is that this is giving us quite a lot of visibility in the medium to long term so that we can easily adjust our capacity planning. And the last change, I would say, in the engine mix is that fuel cells are clearly part of the mix. The timing is still quite a bit uncertain as to when this will reach mass production, but what is getting increasingly certain is that fuel cell vehicles will be on the road at a certain point in time. So the mix is changing, continues to change. You have different forces, regulatory forces, consumer choices, etcetera, that have an influence on the mix.
We don't have a crystal ball, so we don't know exactly which drivetrain is going to come in which proportion at every point in time. But there is one certainty that we have is that there will be a diversity of drivetrains on the road. We don't see today and we don't see in the foreseeable future any single drivetrain technology taking a dominant position and winning the entire or close to the entire This will not happen because, first of all, there isn't a single technology that covers the entire spectrum of application requirements. They can be very different in terms of the consumers' choices and the functional requirements of each mobility solution. And also because most technologies, when you talk about drivetrains, most technologies for clean mobility require raw materials that may have some scarcity attached to them.
And so they may hit some of these technologies may hit supply chain bottlenecks at certain point in time. So we're absolutely convinced that there will be a coexistence of drivetrain technologies in the foreseeable future. And again, this is why I believe that our versatile position is unique and is going to continue to play out in our favor.
And with that, I would like
now to hand over to Pascal, who will elaborate on the developments in Catalysis.
Morning. Can you hear me? Yes. Switch is on. Good.
Thank you, Mark, for the introduction. After this presentation, actually, I have a question is, is Automotive Catalyst a business still worth investing in? And I get that question once in a while from friends and from other people. And if you look back, I've been in that business for about 30 years. And in the last 30 years, that question could have seemed a bit awkward because Automotive Catalysts has been growing steadily for the last 30 years.
But with the with electrification coming in, and Mark has explained it's happening, and it's good for society, it's very good for Umicore, With electrification coming in, the question of whether automotive catalyst is a business worth investing in is a valid question, legitimate question. My goal today is to show you that Automotive Catalysts still has growth potential, and we even call it unprecedented growth potential. You warned me. Pushed the wrong button. Agenda, we'll present again Automotive Catalyst shortly and then go through the different markets so we can show you how much growth potential there is in these different markets.
Our business model of We develop catalyst for our customers to help our customers to meet emission legislation at the lowest total cost of ownership. For those of you who were here or with us in London 3 years ago, you will notice that, that slide hasn't changed. Our business model is still the same. It's good, means it's efficient, it's successful. We haven't changed our business model.
The business is still technology and innovation driven and will be in the foreseeable future. Why? Because emission legislation is getting more stringent. Emission legislation getting more stringent is supporting and actually requiring that we develop ever better catalysts. So our business for the foreseeable future will be technology and innovation driven.
For that purpose, we develop catalysts with our customers in cooperation with our suppliers. We have very strong relationship with universities to develop basic science to come up with the best catalyst technologies. But we also we are with technology driven and customer focus. It's not sufficient to develop a catalyst technology in the lab. You have to adjust that technology to the customer requirements.
We do that in our technical centers. You will visit our newest technical center tomorrow, so you'll get a sense of what we mean by technical center. And then we strongly worked on operational excellence because we have to make science affordable for our customers. So technology driven, business model hasn't changed and will not change for the foreseeable future. So let's go through the different markets.
Light duty vehicles, passenger cars, we have been in that business for more than 30 years. We have a very strong track record. We work with all OEMs worldwide. When we started more than 30 years ago, we only had one plant in Rantzselen in Germany. And over the years, we have developed our footprint worldwide with manufacturing plants covering all regions for all customers worldwide.
Interesting is what happened since we last met in London in 2015. When we met in London, we had just opened up our plant in Poland. Now we will we have ramped up this plant. So beef now what so we've had in Europe basically 2 plants in Germany, one plant in Sweden. 15, we opened up our plant in Poland.
By the end of next year, we will have closed our historical plant in Rheinfelden. So at the end of this process, instead of 2 plants in Germany, we will have 1 plant in Germany. And we will have increased the capacity of our plant in Poland, resulting after this restructuring process into more capacity in Europe than we had before this restructuring plan. That's the first major step we took in Europe, more capacity with expansion in Poland. The what happened as well in Suzhou in our plant in China is I know we're not supposed to give capacity, so I will only say that we very much increased capacity, strongly increased capacity in China to support our market share gains and to support the growth in China.
What has also happened is we've opened a plant in Thailand that was necessary to support our Japanese OEMs. And our plant in Pune in 2015 India had just been opened, and in the meantime, is ramping up, is going very well, and we have approved an expansion of this plant in India. So manufacturing footprint covering all customers worldwide, restructuring in Germany resulting to in Europe resulting in more capacity and strong expansion in Asia. In America, the market is not growing as fast as in other regions, so you don't see much happening. But in these plants, we're also very strongly working on operational excellence to make capacity available for future growth.
Heavy duty. Contrary to light duty vehicle, we are more of a newcomer in this business. Umicore decided in 2,007, 2006 thank you, Mark. In 2,006, Umicore decided to anchor this market, 2006, only 12 years ago. In London, in 2015, at that time, we had just opened up our plant in Florence.
We were ramping it up, and we had just opened up our plant in Suzhou. That was the picture. Today, our plant in Florence is running full. Our plant in China, I said the light duty vehicle plant capacity had been strongly expanded. The heavy duty plant in China over the next 3 years will be very, very much expanded.
We expect a very strong capacity expansion in China. What happened as well is we will open up a heavy duty line in Pune. SOP is scheduled for next year. We have our plant in Korea to service our customers in Korea. And as Mark mentioned, we've added 3 plants in heavy duty through the acquisitions of Halitubsa not Halitubsa, through the acquisition of the heavy duty business of Halitubsa.
We headed a plant in Denmark for Europe, a plant in China and a plant in Brazil. We were a newcomer. 10 years ago, we decided to enter this market. 5 years ago, we are a newcomer. Now we have development programs with most OEMs, which will lead to a major growth, and I'll discuss that a bit later.
North America, we don't show any manufacturing plants there. It's no secret that our market share in heavy duty diesel in North America is small, and we service that actually from our plant in Burlington because when quantities are too high, we can make heavy duty parts on our passenger car production lines. Whenever we have a commercial success in North America, we will expand in North America. I said our business is technical driven, so a short update on our technical centers. We have technical centers across the globe to adapt our technologies to the customer needs across the globe.
Sorry, I come back. I thought it would be a different color. So what has happened in Technical Centers? Quite a bit has happened actually in Auburn Hills since London last year. In Auburn Hills, we've revamped our chassis dyno in Japan.
In Korea, we built a new tech center in Songdo, and you will see that tomorrow. And in China, we have expanded our test center capacity. So again, we not only spent money on production plant, we spend quite a bit of money on test center because it is the success factor of our business. Mark mentioned that. We also went through a few acquisitions.
We bought the 50% remaining share of AUDEC in Korea. Why did we do that? When we built the joint venture in 1985, at that time, ODEK was supplying on East Steel, the purpose was to supply the Korean customers. And in these days, I took back more than 35 years ago, to Korean customers who are mostly making car in Korea. So ODAIX supplying Korean customers in Korea.
In the meantime, Korean customers produce more cars outside of Korea than in Korea. And these cars produced by Korean customers outside of Korea are supplied by Umicore plants. To allow a better coordination between the supply in Korea by ODEC and the supply by Umicore outside of Korea, we decided to buy the rest of the acquisition to allow a better service for our customers. And Mark mentioned, we also bought the heavy duty catalyst activity of halotopsa with a plant in Brazil, Denmark, China and a tech center in Denmark. And that give us an expanded product portfolio and a much stronger access to a few key customers.
So that's where we are. Now the Automotive Catalysts needs 2 things to be successful: needs combustion engines because without combustion engines, I got a problem and it's emission legislation. And Mark mentioned that the public awareness towards emission legislation, towards emission has been increasing dramatically over the last 3 years for good reasons, for bad reasons. Fact is awareness is much higher. The result of that is our customers, when they make an award decision for Catalyst, they now go for the best technology.
You can always make an engine work with good technology, but now customers between a good technology and a better technology go for the better technology. That's what's happened. And Mark call it the diesel scandal. That's one of the impact of the diesel scandal. Customers now go for the best technology.
So I said we need combustion engines, but we also need legislation. That picture is very busy, but you should only focus on the visual. What is that picture saying? Each line represent a country or region. Each line, every time there's a change of color, it means emission, legislation is changed.
You see all these colors means all the different countries have different legislations. And if you look horizontally, colors keep changing, means legislation keeps changing. Legislation changes, we have to develop a new catalyst for our customers. That is a driver, the reason why we believe that innovation and technology is the success factor of this business. The other thing you see
in sorry,
the other thing you see on this picture is that for 2025, discussions have started now to establish a new emission legislation. Today, in Europe, I think Europe as an example, emission legislations are governed by Euro 6. Discussions are ongoing now to define Euro 7. Euro 7 will be more stringent. How?
We don't know yet, but we know it will be more stringent. It will be applicable 2025, and we have to work now in R and D to be prepared for Euro 7. Again, another reason for still developing and still investing in R and D in Automotive Catalysts. One example, if you look at U. S.
A, this I said whenever colors change, it means a step in technology. If you look at this picture, 1st line USA, apparently nothing is happening. Actually, things are happening because within Tier 3, within Tier 3, there's a regular upgrade of emissions. Emissions are continuously going down. So now I won't go through all these lines.
We will focus on the 3 regions where most is happening in terms of legislation, and that is Europe, China and India. Let's go through China first. Marc mentioned that before China will become the pace setter or has become the pace setter in terms of emission legislation. And they allow me, I will go into a bit more detail in through this slide so that you understand what it means for the business. First line, you see emission standards going from China IV, China V, China VIA, China VIB.
These different steps mean reduction of emission. Going from China V to China 6A, basically, CO carbon monoxide emission limit is reduced and particular number are being reduced. Going from China 6A to China 6B, it's reduced again, actually reduced by half. On the China 6B, the emission limits in China are half the emission limits in Europe,
half.
Next line is about test cycle, because not only about emission, it's about how you measure emission. Until China 5, which is still today, emissions are measured with a test cycle which is called NEDC, and we will move to the LWLTC, which is World Harmonized Test Cycle. And this test cycle is a lot more severe, a lot more dynamic and push and require a much better catalyst to meet the legislation. So limits are going down. The test cycle is getting more aggressive.
Real driving. All that, there will be what we call real driving. So emissions will have to be met not only in the lab, but they will have to be met on the street under real drive conditions. That's another criteria to be met by customers. Durability is increasing.
And in the last line, fuel efficiency. And this fuel efficiency increase or fuel consumption reduction will drive a faster introduction of GDI, gasoline direct injection. And gasoline direct injection also has an impact on the catalyst architecture. So legislation is actually interesting bedtime reading. But it's complex.
It's a basis for our business, drives our growth. So now that you've seen what's happening, let's go let's see what it means in terms of catalyst value. That's the market in China for passenger car in 2025, 34,000,000 cars. These are not our numbers. These are the numbers from IHS.
We paid a lot of money for these numbers. We decided to believe these numbers. 34,000,000 cars in China in 2025, about 6,000,000 fully electric, so at least still 29,000,000 cars with combustion engine. So what's happening with this combustion engine? China 5, current legislations.
Basically, all cars out there, they have either 1 TWC, three way catalyst. The TWC is what reduces takes care of NOx, CO and hydrocarbon, basically reduce the pollutants. So cars today in China, on the China 5, basically have 1 three way catalyst or 2 three way catalysts. China 6A is coming. China 6A reduces the emission limits for carbon monoxide, introduces particulate number.
Some customers will use what we call GPF, gasoline particulate filter, that green part, on top of the three way catalyst. Some won't use it as of 2020. Catalysts will get bigger because emissions limits go down. And the result of all that, that's the beauty of Excel sheet, is we see an increase of value per car of 70%. In 2020, which is 2 years from now, the value of Catteras per car in China will be 70% higher than today.
In 2023, that's when the legislations cut emission even more, and I said at that time, emissions are 50% the level at Europe, That's when China introduced real drive emission with a conformity factor of 2.1. And at that time, all gasoline engines will be equipped with a catalyzed gasoline particulate filter, that green part on this picture. That picture sorry, that picture represents an exhaust line, okay? So the green part is the filter. All cars will have 1.
Free workouts will get bigger again, resulting in the value of catalysts per car being 2.4 higher than today.
That's the result legislations
gives work to our R and D people and gives food for the innovation, that's a result of business. In 2023, 5 years from now, the value per car will be 2.3, 2.4 times what it is today. I said we go through 3 markets. I'll go a bit faster now because you went through the logic. Europe.
Europe, similar things are happening. The CO2 target is getting tighter. That has implication on introduction of gasoline direct injection engines. Emissions of Euro 6B saw the introduction of particulate numbers. Euro 5 had less of that.
You'll see a change of cycle, same as in China. Euro 6B today is being tested on the NEDC. Will move to WLTC. Real dry emission will be implemented. Actually, similar trends.
So let's not go through these details again. Similar to what's happening in China, a bit different, but similar things. Important is what is the impact of these legislations on the catalyst value per car. Again, IHS, euros 20,000,000 in 2025, I'm talking Western Europe here, including electrical cars. Today, what you see in Europe is exhaust lines with freeway catalysts basically.
Starting September 2018, which is 3 months from now, Most cars will be equipped with a filter, some with a pure filter, some with a catalyzed filter. Catalysts will get bigger. At the end of the day, the value per car will be 80% higher. The value what we sell to the customers will be 1.8% what it is today. 2021, that's when Europe introduces rear drive emission.
At that time, all gasoline cars will be equipped or GDI cars will be equipped with almost 80% of the GDi cars, gasoline cars, will be equipped with a particular filter. Three way cars will have got a bit bigger again, meaning in 2021, which is 3 years from now, not 3 months, 3 years from now only, the value per car will be 2.2 what it is today. Factor 2 in 3 years. Same number of cars, just value is twice as high for us as it is today. Same thing is happening in diesel.
20,000,000 again is total car population in Europe, gasoline, diesel, electrical, the whole thing. Same thing is happening in diesel. I will go a bit faster here. Euro 6B, there are 2 different types of systems, different types of catalysts, diesel oxidation catalysts, filters, NOx reduction catalyst. Important is, as of September 2019, all vehicles will be equipped with different system, and the value per car will be 30% higher than it is today.
I have to say here, the same thing applies to gasoline. The dates I'm giving you here is the date when all vehicles are equipped with these new systems. In Europe, new type approval gets equipped a year earlier. 2019 is when all diesel vehicles will be equipped with the systems. What I said for gasoline was 2018 2021.
That's a date when everything all vehicles are equipped, new types are equipped before. And in 2021, that's when our real drive emission come in. All diesel cars in Europe will be equipped with an even bigger system, resulting in catalyst value per car being 50% higher than today. I'll go for India because same thing again, emissions getting tougher, test cycling tougher. And at the end of the day, Indian market will be 8,000,000 cars in 2025.
Barratt 4, Barratt 4 is the current legislation. Catalysts are small. Barratt 6, Catalysts are bigger, 50% more value, that's in 2020, that's in 2 years. And Barat 6, 2023, still to be defined in terms of real drive emission. Introduction of catalyst filter, at that time, the catalyst value what we'll sell to the customer is 3x higher than today.
Same thing for diesel. Bharat 4, a system simpler, Bharat 6, much more extensive system, resulting in the catalyst sold to the customer value 3 times higher. So thank you for your patience. I think it was worth spending the time so you understand where all these legislations are coming from, what is happening, why it's happening and the impact on what we do and what we sell. So what we saw is the impact of legislations on the gasoline catalyst market will result in what we sell being between 70% to 3 times higher at constant engine quantities.
You see the same factor in for diesel, and I'm only using these 3 regions there, which basically allows us to say because in some markets in America, a little bit less is happening. But basically, the conclusion is I'm not going to small countries. I went through the details of China, Europe and India. You saw where it's coming from. But the conclusion is the gasoline catalyst market value will double, at least double between now 2025, driven by these legislations.
I'm not talking car quantities increase, I'm talking the value we sell per car, that will double. In diesel, the value of what we sell to the industry, the value will increase by 50%. And what comes on top of it is the impact of plug in hybrid. Plug in hybrid is driven by is supported by electrification. But plug in hybrid, you know that, but I have to repeat it once in a while.
A plug in hybrid has a combustion engine. So plug in hybrid is a customer for me. And the plug in hybrid today requires 20% more catalyst volume than a non plug in hybrid. So plug in hybrid will increase the catalyst consumption. So when you put all that together in an Excel sheet, that's what comes out.
The market the capitalist market for passenger car will double until 2025. And that number in 2025 is around about €9,000,000,000 And China is the biggest share of that growth.
Doubling,
China biggest growth. Assumptions behind that, we have taken some assumption in terms of internal combustion engine growth, but less than 1%. So if you tell me I don't believe that combustion engine will grow by 1 percent per year, that's fine. It's not double, it's only 90%. Okay?
So double because of value creation, because of legislation, not because of engine growth. In these assumptions, we've assumed that diesel share in Europe would be 30%. If it's only 10%, that number out there reduces by 5%. So basically, in any type of conditions you can think of, no engine growth, lower diesel, bear one number in your mind, the catalyst market for passenger car application will double until 2025. So that's good for the market.
Now what's on for us? Umicore. Today, Umicore at Umicore, we are increasing our market share in the gasoline segment, specifically in China. And this market share increase will become even more visible in 2020. And we increased our market share in gasoline.
This increase is supported by our very strong technology for GDI application. GDI, gasoline direct injection, is the gasoline engine of the future. And for this specific engine, Umicore has a very strong technology and is supporting our growth in market share. It's happening today. Will become even more visible in 2020 and the years thereafter.
In diesel, we're smaller, But in a few applications where we are supplying, we have strong technologies. Otherwise, we won't be smaller, but we'll be nowhere because again, customers only go for the best. So wherever we have business, we have a very good technology, but we're smaller. But if you look at our relative market share in gasoline and diesel, if diesel decreases faster, because we are much, so much stronger in gasoline, the impact on Umicore, Automotive Catalysts, is not there. We can compensate.
Whatever we lose in diesel, we can compensate with our gasoline business. So that was I'm doing fine. Now let's go into heavy duty. Heavy duty, same thing, same picture. Let's not go through in details.
Every region has a legislation. Change of color means different legislations means growth potential for I will focus on the two regions where things happening the most and where legislations is changing the fastest is, again, India and China. China, there's a norm for on road application and off road application. The total engine market in China in 2025 is predicted by another marketing company, KGP, to be 3,600,000 engines. These engines are going partially for on road application, partially for off road application.
I'll see the I will look at the impact of legislations on the on node applications. Give me 2 seconds. Sorry. You see it's hot out here, hotspot. The okay, so China, the 3,600,000 engines in 2025, 40% off road, 60% on road.
Now I will focus on the on road applications. We are currently under China 5. China 5 on road basically engines are equipped with an SCR, which is a NOx reduction catalyst. China 6 will come in 2021 nationwide. China 6 will start a bit sooner in some cities, some regions.
But to make it simple, we every time I present these figures, whether it's for passenger car or for heavy duty, I take the date when the whole region and all vehicles are affected by these new legislations, okay? So in 2021, all China 6 engines, heavy duty engines will be equipped with a much more sophisticated exhaust system with a DOC filter and SCR, resulting in the value per truck almost tripling, 2.8. If you look at India, similar things happening. In 2025, we see 1,100,000,000 engines, about we see KGPCs, and we believe that. €1,100,000 at that time about of this is about 60% off road, 40% on road.
And again, I will only focus on the on road legislation. Today, these on road engines are governed by BRAD 4 with an NOx limit of 3,500 milligram per kilowatt hour, meaning the exhaust system either has a small DOC or small SCR. DOC diesel oxidation catalyst, SCR NOx reduction. With Barratt 6 coming in, in 2020, legislation stand is similar to what we have in Europe, and customers will move from this simple system, either the UOC, either the SCR, to a much more complex systems. And value per truck will increase by 4 times 4.
So when we see heavy duty? When we see heavy duty, we've seen that legislation is getting tighter in China and India for on load application, resulting in value increase for catalysts per engines. And what we also see in heavy duty, contrary to passenger car, is an increase of engine volumes. Between now and 20 25 by 60%. I am not talking about a 60% increase of engine production.
I'm talking about almost 50% increase of engines being regulated. These off road engines today are not regulated. In 2025, they will be regulated in China and in India. So they exist today, and they contribute to a big portion for this 60% volume increase. It's a volume increase for us as catalyst manufacturers.
And in 2025, the 60% volume increase because these engines become regulated will be regulated at a China Ford type level. So the catalyst value in these off road engines will be still small but will increase of the future and will give another step of another step for business increase after 2025. So what is the result of that? Strong value increase for onward application in China and India, some value increase in Europe, little in America, volume increase mainly because off road engines not regulated today in India, China being regulated in 2025. The result of that is the market, the catalyst market for heavy duty application will also actually more than double between now and 2025.
And China is by far becoming the biggest market because on road trucks would be regulated just as strict or stricter than in Europe and because off road trucks or tractors, earthmoving equipment, which today are not regulated, will become regulated in 2025. Not at China 6 level, at China 4 level, but still will require catalyst. And in 2,030, these off road engines will become regulated at a stricter level and will provide the next growth opportunity. So again, good for the market, this doubling of catalyst for heavy duty application. But what's on for us, we started this business a bit later than our competitor.
But today, we have a very competitive technology portfolio. Our plants are running at a very high utilization rate. And we have cooperation now, technical cooperation with most of the heavy duty customers, which gives high level of confidence that we will benefit from this doubling of the market. Now if you put all the everything together, that's the addition of the catalyst market for passenger car and for heavy duty, they're both doubling, so the sum is also doubling. So that's the message of today.
The market for catalyst the automotive catalyst market for emission control for cars and trucks will double between now and 2025. And it is a technology play, an innovation play because this doubling is not engine production driven. It's not car production driven. It is solid driven through legislations and through innovations through the better catalyst that we supply to
our customers.
So now I started this presentation with one question. Is Automotive Catalyst still a business worth investing in? I hope that I've convinced you that the growth potential is there. It's even unprecedented. It's driven by tighter legislation.
And again, it will the market will double until 2025. China is becoming a pacesetter. And we believe we don't believe, we are convinced that through our very strong technology in gasoline direct injection and through our competitive technology in heavy duty diesel and our cooperation with our heavy duty diesel customers that we're very well positioned to take an over proportional piece of that market and also doubling in the market. Thank you very much. Now I guess we open the floor for questions now.
Thank you, Pascal. Marc, you are invited back on stage for the Q and A. May we ask you, when you have a question, can you raise your hand? We will bring the microphone to you. Can we also ask you to stand up while you asked the question and please name your state your name and company before asking the questions?
We have half an hour, so we should have sufficient time. But can we also remind you kindly to limit first to one question per person so that we can give the chance to everyone to raise their questions. Who's first?
Good morning, and thank you for taking my questions. Sebastian Brink of Berenberg Bank. Could I start please with one on the capital intensity or the capital demands of potentially outgrowing the business in the market growth in Autocatalyst for the next, well, until 2025. How much growth CapEx are you going to have to allocate to this business? And what is the rough maintenance figure that you would give?
And sorry, I know you asked for just one question, so just a point of clarification. When you mentioned that the market for light duty auto catalysts, I think it will be worth €9,000,000,000 is that dollars or euros? Thank you.
Okay. So one question on CapEx because I can give you numbers. But the one key element of our business is in our business model is operational excellence. And by operational excellence, we mean doing more with the same. And the biggest portion of the capacity required for this doubling the market will be provided through operational excellence, doing more with the same.
There will be CapEx and I'll leave it to Mark to say we'll give numbers, but the business will remain very strong in terms of cash flow generation.
Before taking over, Pascal, can you clarify the EUR 9,000,000,000, is that euros or dollars?
Euro current euro, 2025.
I don't
know what the euro will be in 2025, but if you
So let me maybe add a little bit of color on the CapEx and remind you that we have invested a lot to modernize the catalyst production and research and testing configuration over the past several years, which means that today we enter this new growth phase with very modern facilities, state of the art facilities with state of the art capabilities and state of the art research and testing facilities as well. So there will be continued investments and not more than what we invest today, which means that the cash flow generation in this very fast growth phase is going to increase in a way because CapEx is not going to follow the pace of the revenue growth. So CapEx is going to stay more or less in the same region as it is today with significant revenue and profit growth, which means that indeed, the cash flow profile of this growth business will stay quite unique.
Mudlugan again, ABN AMRO. A question on your margins. If I look at your R and D spend in a very long time period, it has actually gone up as a percentage of sales with the increase in value of markets and the potential increase in scale of your business.
Do you expect that to come
down before your margins will go up?
Yes. R and D will increase because all these legislations cannot be met without work. And as we show, they are creating value. But R and D will increase much at a much slower rate than the revenue. And the yes, so the R and D quarter will be much lower in 2025
today.
It's Adam Collins from Liberum. I had a question on the commercial development on the HDD side. So your regulatory road map shows that in the U. S, we've only got GHG emissions through 2025. I wondered whether that would be sufficient window in terms of regulatory change to enable you to enter the market in a bigger way.
And then on a related note, you talked about how do Topso. It might be helpful just to have a better understanding of the profile of that business. How much of that business is off road versus on road? And what kind of scale up in revenues for the HDD business did that provide? What is the size of that business relative to the existing base?
So North America, yes, the future legislation is a bit uncertain, okay? There was a Greenhouse Gas stage 2. Whether that comes or not is not 100% clear. And you're right, the tightening of legislation is not giving us an easy open door to this market. That's true, right?
Customers have a system which works, but we are in cooperation in development programs with some big U. S. Customers. So there's a willingness in the market to see Umicore supply the American market?
Whether that will result in business remains to be seen. So it's today and we have mentioned that a few times as a late entrant in the segment. We were a too late entrant in the North American market because the main decisions had been made by 2,007, 2010 time frame, which meant that we were too late for that market and explains our very limited position today. And indeed, it's we're not trying to penetrate a given market at any price. That's obvious because we're not driven by market shares.
We're driven by profitability. So we need a window of opportunity to open up for us. There may be one, and we'll see how that plays out. But that remains way more uncertain compared to the developments that Pascal has highlighted for the other regions when it comes to HDD.
What's important is we are truly recognized now by the American OEMs. We have technical programs with these customers, but I don't expect business sizable business before 2023 2025.
And then will you also elaborate on what the Calypso acquisition brings?
Yes, Halypso Halypso, we bought 2 businesses. We bought Catalysts for heavy duty applications and Catalysts for stationary applications. The heavy duty part of the business is 90% for on road application and increases our market share by about in this market by about 30%.
Chetan Udeshi, JPMorgan. You presented a very bullish case on growth in this market. EV is happening as well. So how are your auto OEMs reacting to this? Because it seems like they have to spend on EVs, they have to spend on this side of the business as well.
So clearly, their spending for them is going up significantly. So are they putting some of the pressure on
2 things. The you see the customers reorganizing. The Mark mentioned that the platforms are getting bigger. In diesel, development is less development happening. There were there used to be many, many different diesel platforms that customers are basically focusing on one platform for the purpose of exactly that, saving resources.
So diesel development department in other customers are getting smaller. You can see some of them even merging with gasoline and all that for the purpose of allocating more resources for electrification. Margin, because of this drive for new technology and this more stringent legislation, our expectation is margin will stay constant over the next foreseeable future.
So there is pressure, of course, in every segment. There is pressure. There is customer pressure. There is competitive pressure. But that is not really changing compared to what we've been used to for so many years operating in these industries.
What really is changing is the fact that our customers, in order to save development costs, because as you rightly point out, these are huge in order to save development costs are streamlining significantly their development efforts. And that's why I mentioned earlier the few examples of those customers that have done that in a drastic manner by abandoning a certain number of development avenues like abandoning diesel altogether so that they can indeed focus more resources, development resource, engineering resources to electrify drivetrains and gasoline indeed. So the most significant way for the industry to address the move to clean mobility from a development point of view is by reducing the number of options nowadays, while until 3, 4 years ago, all options were kept open.
I'm Celine Tan from GIC. Pascal, thank you very much for outlining that, say, for example, the addressable value for Umicore in a plug in hybrid is 1.5x the value in ICA. I think those are very interesting stats. I was this is perhaps a request maybe addressed later on in the day. It's could you address the addressable value for the entire Umicore for the different types of potential vehicles in the future, battery EVs, fuel cells?
So other than just automotive catalyst, what is the addressable value for the entire Umicore? I think that could be very interesting.
Well, Celine, I will ask you to bear with us because I want first to go through the other presentations and regarding what we do in respect of electrified drivetrains. And then we can talk about that. This being said, I will not mention any figure about the addressable market in electrified drivetrains because there are too many, I would say, estimates or projections circulating today. There is still a pretty wild range of projections. And I think I prefer to look at it the other way around and by looking at how Umicore is outpacing the market growth in that segment.
While it is indeed still difficult to make out today how big exactly that segment will be. There are many factors that drive the value of that segment, and these will be these factors will be outlined later today. So please bear with us.
Hi, thanks for my question. Charles Bentley, Bernstein. So you talk about the importance of China. Looking at your customer mix, one thing that you noted full year was kind of challenges with Korean manufacturers in China. I was wondering, could you explain a bit more about your positioning with both local and foreign customers there?
Thank you for the question. That's a major also major change since 2015. It is true that in 2015, we were highly dependent on our current customers in China, and we have strongly rebalanced this situation, which allows me today to say that we are growing market share in China because we have rebalanced. We have a much bigger share at European customers in China. We have a much bigger share at American customers in China And we're also growing with local Chinese customers.
So I feel a lot more comfortable now with my customer my with Umicore customer portfolio in China than we had 3 years ago.
What we've seen also developing in China is that until a few years ago or until now, many domestic Chinese car producers were actually using domestic catalyst producers. And with the move to China 5 and to a much larger extent with the move to China 6, these Chinese catalyst suppliers are being phased out because they don't have the technological capabilities to provide the systems that meet these very stringent regulations. And please bear in mind that the China 6 regulations are going to be tighter than Euro 6 regulations. So there is a shift away for domestic carmakers from Chinese suppliers to the global catalyst players. And given our very strong position in gasoline technologies and in particular, in GDi related technologies, which are starting to dominate the Chinese passenger car market, we are indeed benefiting vastly from this development.
So that's indeed we are starting to have a very well balanced portfolio between the global brands and the local brands in that respect.
If you mind me, I didn't mention, but we're also growing with the Japanese audience.
Wim Hoste, KBC Securities. I have a question on hybrid vehicles, which I think in terms of temperature management are quite a challenge for catalysts. Given the growth expected in the EV markets, can you maybe explain how your technology is specifically for hybrid vehicles? And what kind of market share or prospects you see in that part of the market? Thank you.
I cannot give you any specific market share on plug in hybrid.
What you say is correct.
The thermal management is a lot more complex. The cold start adding stress on the catalyst system. And the message I want to leave here is, which I presented earlier today, is a plug in hybrid vehicle will require about 25% more catalyst than the equivalent non plug in hybrid. And we have very strong technology to address these cold start type of running conditions.
If I may add one point to that, and please correct me if I'm misrepresenting technological developments, is that in the first instance, when carmakers started to introduce plug in hybrid vehicles in the market a number of years ago, they realized, of course, this issue around the call start and repeating call starts with plug in hybrids. And they address that typically by overloading the catalyst with PGMs, which by definition, from a cost point of view cannot be a good solution. So the technologies that we have developed are meant actually to reduce substantially this PGM loading and to address the cold start through sophisticated methods, not just by pouring more PGMs into the catalyst.
Charlie Webb, Morgan Stanley. Mark, just a quick question for you going back to your initial presentation around factory recycling. What type of scale of investment do you think is required there for that big growth opportunity, 1st off? And also, how competitive do you think that market is? Clearly, a large part of the supply chain is worried about cobalt as a scarce material.
So do you see that market as being very competitive? Or do you think you have technical expertise that will differentiate yourself there?
Yes. So we're talking about large investments, so triple digit million investments required to build recycling facilities for and to build scale, industrial scale or larger industrial scale recycling facilities for lithium ion batteries. It's going to be a very, very large market opportunity revenue wise, and we believe indeed that we have technology that can allow us to be competitive and profitable and justify large investments going forward. Our process is different than what we see from the competitive landscape today. It's we're one of the few players to use or maybe probably even the only player to use high temperature processes for recycling, which drives the recovery yields.
And so we are very efficient in terms of recoveries, not only in terms of yields, but also in terms of the scope of metals that we can recover from the recycling process. So actually, our investments are going our investments are probably or possibly going to be larger than those of competing technologies, but they are going to be far more efficient in terms of recoveries and in terms of customers are looking to have closed loop solutions. And we mentioned already a number of years back that this was going to be the probably the ultimate model, and now we see that shaping up in a more pronounced manner. And because of the growing scarcity of certain materials like cobalt, as you are pointing out, because of the need for more traceability, closed loop is one of the favorite avenues for a number of leading OEMs. And so the fact that we are present upstream of their requirements with the battery materials and downstream at the end of life with the recycling solutions will be or should be a competitive advantage in the long run.
Dominic Froudings from AURORA Capital. Mark, I had a question with regards to your 2020 guidance. In light of the comments that have been made so far, you talked about an increasing contribution from the recycling capacity expansion. You talked about outpacing the EV market through your battery materials business. And now what Pascal has walked us through, more than doubling of the market value for Catalysts and you're taking disproportionate shares or outgrowing that market as well.
If we take what we know today, the guidance for this year, which suggests about 30% EBIT growth and then walk out to 2020, would suggest that, that EBIT growth goes down to about 15% for each of the next 2 years. In light of those comments, however, I was wondering why we should see such a deceleration in EBIT growth. Now it's still very good EBIT growth, and
I think a
lot of companies in this sector would be very happy to have that EBIT growth. But in light of the comments, I'd like to understand why we should see almost 50% drop in growth.
Thank you.
Okay. First of all, thank you for pointing out that many companies would be happy with that. And I share your view indeed that this is a pretty enviable position to be in. First of all, let me clarify that what has not changed is our view about the contribution of recycling to the growth. So this is fully in line with the assumptions that we made 3 years ago when we set out the target for 2020.
So the comments that I made today about how the ramp up is proceeding, etcetera, does not imply that we see things differently from a contribution point of view comes 2020. The main change compared to the 2015 assumptions for 2020 is definitely coming from battery materials and the vast acceleration in demand and our ability actually to step up and accelerate our investment plans compared to the assumptions that were made 3 years ago. And that is immediate contribution indeed, and that's explaining the most significant increases this year and for the next couple of years. The invest the sorry, the what Pascal explained about Catalysis is going to have some contribution to the revised expectation for 2020. And this being said, please bear in mind that the doubling is horizon 2025.
So if you remember the graph that were presented, most of the value increases is beyond 2020. There is already some value increase by 2020, but most of it coming after 2020 between 2020 2025. Last comment is about the non linearity, and that's a theme that I have probably highlighted many, many times in the past. Growth in revenues, growth in profits is not linear, and this time is no exception. It is not going to be linear, especially as we're putting a lot of investments in the ground, which means that every time we start a greenfield, we have a front loading of CapEx and a front loading of fixed costs as well, which explains that the growth in revenues sorry, the growth in earnings is not following a linear pace relative to the growth in revenues, but still pretty enviable growth in total, I bet.
Good morning. Geoff Haire from UBS. Just thought I could ask, given the changes you're seeing in the AutoCAD market given moving away from volume growth to more value content in the car, Are you seeing changes in the competitive landscape in terms of what BASF and Johnson Matthey are doing in this market?
I didn't get the one. Do I see changes? Sorry, I didn't get the question.
Just how the competitive landscape is changing? Are you seeing much more competition and more aggression in terms of what your competitors are doing?
Again, the success factor in this business remains technology, okay? So we're very much focused on developing the right technology. And if you had the right technology, yes, there's competition. But at the end of the day, if you have the right technology, you can prevail. And margin, as I said, I expect it to stay the same.
Maybe if I can add a little bit of color to that. Overall, we don't see massive changes in market shares. I mean they have been relatively stable over time and continue to be relatively stable. However, the mix is changing. So within the global market shares or the distribution of market shares among the global players, we see significant shifts with 1 player gaining significant share in light duty diesel applications and Umicore becoming a smaller player.
And next to that, Umicore gaining significant ground in gasoline applications for passenger cars. So the mix change is more evident than a change in market shares globally. And I think this is one of the points that we wanted to highlight today because if you look at that next to the evolution of engine mix, this has an implication on indeed the overall positioning of Umicore relative to our competitors. And there is one thing, Geoff, that I would like to add in terms of to make sure that there is no misunderstanding about how we see volume versus value. The point that we wanted to make today is that we're not going to we don't want to really debate about volume assumptions because volumes are going to be what they will be in a way.
And you will use your own assumptions and your own data providers in order to model these. And the point that we wanted to make is that if we're off by 5% or 10% on the volume assumptions, this is going to be marginal compared to the uplift in value terms per vehicle, per engine. This is really the key underlying message.
Jean Baptiste, Roland Bank of America Merrill Lynch. Marc, you have just highlighted that it's quite important in that business to have a distinctive technology. And the mix, as you said, is changing in light duty vehicles. I'm just wondering how you see this change, the market change evolving throughout the years in heavy duty diesel catalysts. I understand that you have mentioned that you have a distinctive technology.
I'm still quite clear not quite clear what this distinctive technology is. I understand that the U. S. Market has, for historical reasons, not maybe always been easy. There is regulations, which has not yet opened the window of opportunity.
Yet, I guess, the perception is still that heavy duty diesel is a more, let's say, a less strong area for Umicore. Would you say that's a misconception? Or could you perhaps highlight where you have a distinctive technology that's going to help you gain market share in this business? Thank
you. Okay. The heavy duty, the we saw the market growth potential is mainly happening in China. And there's so much work for our OEMs to develop these catalyst technologies that having a competitive technology, I would say, was sufficient to participate to this growth, okay? So that's what we have.
We have I'm not going to say that we have a better technology than heavy duty diesel. I'm not going to say that. I said that for gasoline direct injection. I will not say it for heavy duty diesel, but this competitive technology in this fast growing market in China where customers need all the help they need is sufficient to build market share in China. In America, it will take more time.
As Marcit mentioned, we need an opportunity. Opportunity can come with unique technologies, which we don't necessarily have today besides maybe what we bought with Hadithopsen. And opportunity can come with the customer wanting to make a change, opportunities will come. So with our current competitive technology, we have what we need today in the current business environment to participate to
the growth.
If I may add, just wanted to say that I'm glad that Pascal to see that Pascal was so keen to take your question on HDD because I initiated the business in 2006, and it's good to see that Pascal has now by now adopted my baby. So and this being said, I would also like to make sure there is no misinterpretation of what we say about progress that we make in heavy duty. We will remain a smaller player than the leader in this market in even by 2025 and even if we seize very, very successfully the opportunities that Pascal has mentioned. As a late entrant, again, we are driven by winning profitable business and not winning market share at any cost.
This is Max from Oxford Capital. Just have a question earlier. You mentioned that you're gaining market share from the Chinese domestic gasoline catalyst producers because obviously, their technology is not as good as yours and you are way ahead of them. But when I look at sort of what China is doing in terms of how they're driving leaders in EVs and in batteries and in NMC producers? Who are the Chinese leaders in gasoline catalysts?
And what kind of market share do you have today? And what do you expect in 2025 in China?
So the catalyst leaders in China are very clear. So that's Umicore, BASF and Johnson Mate. There is no way around that. And the Chinese domestic catalyst suppliers are marginal suppliers in the overall landscape. So and I don't want to preempt too much the discussion of later today regarding the battery materials, but the leading, clearly, a Chinese supplier of cathode materials is Umicore.
So it's not China is technology driven like other markets. It's not nationality driven in terms of market shares and government attitudes. And what about market shares? We're not disclosing market shares. And actually, again, the reason we're not commenting on market shares is twofold.
As first of all, there are too many definitions and conventions about defining market shares depending on whether you look at it from a volume point of view, from a revenue point of view, from a profit pool point of view. And typically, that ends up in the sum of market share claims exceeding 100 percent. So I think it's not a very not always a meaningful metric. And secondly and more importantly, we're not driven by market shares. Scale is important clearly, but I don't want us to set market share objectives because again, profitability is more important than market shares.
It was a question on the technical leadership in particulate filters that you've touched on here. And also, Mark has talked about being a driver to market share gains on recent calls. I just wondered whether you might be able in simplistic terms to explain the technology advantage that you have that's driving this. I know it's a complicated subject, just to get a sense of where the competitive edge is.
I guess, the first thing is the customer feedback we get, okay? We customers are highly positive about the products we supply. Our GPF Gasoline Particle Filter offers different functions And this multifunction, and I won't get too much into details, but there are different parameters you have to deal with, with the filter. You have to deal with filtration, you have to deal with back pressure, you have to deal with activity, you have to deal with other types of parameters. And these and the combination of these parameters, our products, if I look at the feedback of the market, is very competitive, addressing all these different parameters of the customers at the same time.
Yes. If I recall the early days of developing these GPF technologies, I recall that there was a discussion a while ago about whether the focus would be on particulate number or particulate mass. And unlike a number of other players, we have declared at the from the onset that we didn't know whether the focus would be on particulate mass or particulate number. And because we didn't know, we chose to develop in all directions and make sure that we would cover both the math and the number. And that's why our filters today have a better, I would say, overall performance because they cover indeed not only the chemical activity, but also they cover the filtration efficiency in a broader manner and better manner than competing technologies.
Sebastian Bray of Berenberg Bank again. Could I please ask one follow-up question on margin development? If Pascal, I think you mentioned earlier that if diesel market share were to say drop to 10% in Europe by 2025, you'd lose about 25% of the growth in Audi. Please correct me if I'm wrong. But if the electrification trend takes off to a greater than expected extent or diesel falls faster than expected, To what extent is there operating leverage in this business?
And how do you think you will be able to protect your EBIT margins? Thank you.
That was just a follow-up question. Yes.
I'll take it.
Yes. And then I'm only correct one thing. Our prediction was not a prediction. The marketing study consensus today is about 30% market share diesel in Europe. I just said, if it happened to be 10%, it won't change the message that our business will basically double.
That was the message. Is it going to be 10? Is it going to be 30? Nobody knows, okay? But whether it's 30 or 10, the business will double, okay?
That was the message,
okay? And now Yes. Because actually, the if it's not 30% and if it's 10%, the impact on the market value and we're not talking about the Umicore position, the impact on the market value is 5%. So that's why it doesn't change the overall message of doubling. This being said, I would like to add 2, I would say, elements of response.
1 is that our position in light duty gasoline market share position and in the direct injection engines and the gasoline particulate filters in particular is so much stronger than in diesel that actually we wouldn't see an impact of a faster decline in diesel sales on the Automotive Catalysts business. Now if we look at Umicore globally, actually and I mentioned that on previous occasions, the faster the diesel decline, the better off we are because, first of all, we compensate significantly through better sales of gasoline particulate filters or gasoline configurations with the filter. And secondly, we benefit disproportionately from the higher number of electrified vehicles that will have to be brought to the market to make up for a lower diesel market share because you know that diesel has a CO2 advantage compared to gasoline. So if car OEMs sell less diesel cars in the mix, they will have to compensate for that through more electrified vehicles. So I think that's I think you should basically ignore the how it would impact the Automotive Catalyst activity on a stand alone basis.
And keep in mind that the broad picture that Umicore benefits directly and significantly from a faster decline in diesel. And that's why we didn't want to have a discussion today and we're not in a really position to have a discussion today about whether it's going to be 30% or 25% or 35% or 10%. We don't know, and we are using market projections. We don't know because at the end of the day, the consumers will choose, and we will see how that plays out. I'm just happy that our position in from a technology and market point of view, as I highlighted earlier, is such that we would benefit from a faster move to cleaner mobility.
One thing one more comment. I get that question all the time from my employees, the employees working for Umicore in automotive catheters business, okay? We tell them the business will double between now and 2025. They tell me, Pascal is all good, but I'm 40, okay? In 2025, I'm 47.
What's happening then? And now I will go even more long term perspective. And there are studies out there which shows that because I say we need combustion engine. Combustion engine today, production worldwide, passenger car, passenger car is about EUR 90,000,000 is expected to grow maybe EUR 200,000,000 in 2025. Small growth again, EUR 90,000,000 to EUR 100,000,000 still doubling the business, okay?
And then long term perspective, see combustion engine maybe going down to EUR 90,000,000 back to EUR 90,000,000 in 2,050. But in 2,050, almost completely plug in hybrid, this EUR 90,000,000. And then but the cars are growing and then above the EUR 90,000,000, then you have full electrical cars and you have fuel cell. So I will give you the answer I give the employees working for me is combustion engine will still be there in 2,050. So if you're 40, you're okay.
I would say if you even if you're 25, you're okay because Umicore is so well positioned that in a way we're not concerned about where the engine mix is going as long as it's going in the direction of cleaner mobility because that is what we're betting on.
Thank you for your questions. You will have plenty of opportunities to interact with management later today as well and tomorrow. We have a break now, and we will come back in half an hour, and then Kurt will kick off his presentation. Thank you. Welcome back.
We're ready to continue the presentations. Maybe one practical thing because I got some questions. All presentations will be uploaded or being uploaded already on the corporate website. So there's no need to take pictures. You will have access to all the material.
So I will now hand over to Kurt van den Putten, who will talk about the widening gap in Rechargeable Battery Materials.
Thank you, Evelyn. Can everybody hear me at the back as well? Yes, I see. Good morning, everybody here in Seoul. Good evening, the people in the U.
S. Following through webcast. I almost don't dare to say welcome to the European listeners because it's probably a terrible hour over there. Nevertheless, if there are brave people in Europe, welcome. My name is Kurt van de Putten.
I'm Senior Vice President for Umicore's Rechargeable Battery Materials. And in the next hour or so, I would like to help you understand how we are going to increase the gap. When you say increase the gap, you can think of a lot of things. We think of increasing the gap with our products, our technology, our enthusiastic people. But I would like you to think about increasing the gap.
By the way, who is driving in the audience an EV or a PHEV today? I didn't expect anything less than that, so that's more than the penetration worldwide, so that's good. When I talk about increasing the gap, ladies and gentlemen, think about leaving at the traffic light and letting sorry, Pascal, an ICE based Porsche behind, right? So that's increasing the gap. That's how electrification feels, And once you've gone electric, I see barely no people go back to standard transportation modes.
Closing or increasing the gap sorry, sorry, sorry, this is a you warned me, Evelyn, nevertheless. My presentation is basically structured the same as Pascal's. I will start by setting the scene, explaining a bit the business profile of today, what is our daily environment that Umicore's battery materials team is working in. Later on, I will explain where does that acceleration is suddenly coming from. I mean, we all expected the market to increase, but nevertheless, hundreds of smart people misjudged it for years, and we were all taken by surprise by the speed.
Thirdly, I want to focus on why is Umicore RBM? Why is Umicore's Battery Materials business so successful? I'm 20 years in this business, so I think I have a fair credibility to look back and to explain or try to explain at least how I feel we made it to the position of today and how I hope that with the talents, with the motivation that we have, the technology that we master, how we are going to further increase the cap. And last but not least, of course, the key takeaways to conclude. I'm 21 years with the company.
And since day 1, I was either directly or indirectly involved with Umicore's battery materials project. This means in reality that I've seen a project team with 1 young PhD material scientist and 2 researchers grow to a business unit of today more than 1,000 people. That's the reality. That's the journey we've gone to. That's where we are.
And believe me, this has not been through a very aggressive pricing model. This has been through the use of brains of people. This has been through technology. Technology and innovation is driving our current and future market presence. This is a timeline of the last 20, 25 years.
And without going into all the details, I mean, the presentation is going to be available. I invite you to go and explore that later on, but I will highlight a number of dates, the ones in red. 1995, a team within Umicore starts to look into an application that we are serving with cobalt chemicals. We are serving the Japanese market with cobalt oxide. In the past, a chemical used for the pigment industry or the catalyst industry.
And suddenly, there is a use in Japan and Asia for the electronics sector. It seems to be it is a catalog material for lithium ion, a very, very promising market at that moment in time for portable electronics. And soon we realized the value is not in the chemical. The value is in the active electrochemical component. And that's how we started and that's how we tumbled into this industry.
1998, I remember visibly one of the very first product meetings that I attended was a product review when we were evaluating different chemistries. What is the potential of different chemistries as a cathode material? What products did we evaluate in that meeting? Lithium cobalt oxide, NCA, NMC and LMO in the early 2000s. So I want to correct maybe a wrong perception living now in the market that high nickel products are the products of today and the products of tomorrow because there is more energy inside.
No, ladies and gentlemen, no. NCA was actually the very first mixed transition metal component layered oxide that has been studied. The oldest patents have expired. That's the reality. Why did such a promising material then never make it to the market?
Very simple, because the product doesn't or was very difficult to be applied in a battery in the form factor that the battery makers were using or that you and I were using in our first mobile phone. The product was not matching the application. And if that's not happening, if the product doesn't match the application, there is no application. If there is no application, there is definitely no customer. So this is what you have really what you have to remember.
It's all about having a product that, of course, works, but that is fit for the application. And I will come elaborate I will really discuss more about that in the next couple of minutes. We can go a little bit faster now over history. 2,003, we produced the first NMC materials that are today the key products in our portfolio. In 2003, we made the first 51050 gram of these materials.
10 to 15 years later, these products go May 3. I invite you to analyze the battery industry. Many, many reference technical reference people will always say it takes 10 years to get a product from lab bench into mass scale production. This is the right example. This is also saying the same thing.
And it's not because it's NMC, it's not because it's LCO. You see exactly the same happening with other chemicals. 2007, I was enormously excited when we were or when the first truck left this Korean plant that you will see tomorrow, left for our customer overseas to produce the first EV batteries. That was a prototype series for one of the big OEMs still around and Umicore material was inside. That was the start of NMC in Automotive.
2011, I highlight this year because in 2011 based on years of technical research, we decided to buy an IP portfolio from the company FMC, which was a former competitor of ours. They left the business, but they had to our understanding a critical piece of IP. And in this industry, IP has become key. I will come to that later on. That was the start that is basically the foundation for our high energy LCO products that we have developed and that we are currently still selling to the portables.
2012, please rewind mentally 10 years, let's say 7 years back, at that moment in time, the industry had absolutely not decided which technology they would use as a cathode material. Automotive industry had not decided what kind of battery technologies they would use for which different subsegment in their portfolio. That's why we started our work on lithium ion phosphate. Lithium ion phosphate has some really specific product performances that are very interesting for certain applications. The products, the components are cheap, iron, phosphate.
They are abundantly available, so everybody has access to it. There could be a huge potential for that. Now next bullet 2015, and immediately focus to the bottom one. We decided to focus on LCO and NMC. Also this is innovation.
Innovation is daring to focus, is daring to explore things, but at a certain moment in time, you also have to close doors. You have to say no. And there is always a customer trying to convince you that you should continue. There is always one who sees the opportunities. But in the end, you have to make your own opinion based on data, based on experience.
And then the last one, 2017, I want to conclude here the innovation history lesson. 2017 was for us also a very important and critical year because we complemented, we expanded our IP portfolio for NMC. You all know we had first a license on the 3 ms IP. We finally acquired that IP. And then in 2017, we complemented that with A and L IP.
And less known, but nevertheless quite important for us, we bought also an IP portfolio from a company, CSEM. This is a Japanese joint venture that stopped operation, but that had both for NMC precursor and for NMC Materials quite critical IP. So what I want you to remember, it takes time to build your technology perseverance to get where we are. Just like Pascal, I can show slides that I've shown 3 years ago in London as well. And actually, it's not because I wanted to save time to prepare it.
It's because it works, and I'm proud to work under such a business model. Our business model fits perfectly in the business model that Mark has presented for the group. We work with metals. We work close with the customer to develop active materials that provide the functionality, and we bring this to market in the fastest possible way. And I hope you agree with me that at this moment in time, speed in the battery materials world, speed is of strategic advantage.
Last but not least, we have an integrated process flow. Integrated process flow means that we base and I come to that in more detail, but I want already somehow to define the criticality of that. When you make cathode materials, take NMC as an example, you are combining 4 critical metals, of course lithium and then nickel, cobalt, manganese. All of that has to come nicely together at the right moment in time with the right quantities at the right price. And it's not because pure cobalt metal today is the most competitive form of cobalt you can buy today that it's the same thing tomorrow.
Things change over time. It's function of supply and demand depending on the how it evolves in the supply chain. And it's because that integrated supply, together with the recycling, that we have such a solid and intensified supply chain. In the end, supply chains for such a cost competitive critical components in this application, full supply chains are going to compete. And we are part of the cost competitiveness of our customers.
We have an exciting market in front of We are basically defining 3 subsegments. First of all, the lithium ion battery market is serving the energy storage systems. Energy storage systems go from a kilowatt or a couple of kilowatt hour all the way to megawatt hour systems that are connected to the grid or that are used as a backup power in remote areas. This market is going to grow. I think industry observers are or at least are agreeing that this market segment is at this moment in time the most difficult to predict.
You see quite a bit of variability in size. In our predictions, we see this going to 40, 50, 55 gigawatt hour in 2025. The second market segment is portables. So let's say the oldest, the historical segment where we are present with our high energy lithium cobalt oxide. This market continues to grow.
I mean, we as individual customers, we all like to buy more gadgets. We like to buy phones with bigger batteries inside. We like to talk more. We like to stream more, whatever, which makes that the overall battery capacity that needs to be produced for portables continues to increase a lot. 3 years ago, I presented at that moment in time younger and proudly and enthusiastically a market potential for transportation.
And I kind of left a bit flexibility, and I presented 2 cases. I presented a base case and I presented a high case. And today, I'm actually here to confirm that even that high case was by far not high enough. So Pascal is saying some markets are growing strong or even stronger. Well, I don't know what else I can use, but I think this is even stronger than Tron Pascal, sorry.
This is, let's say, transportation for passenger cars. But on top of that, you have still the heavy duty segment. So buses, trucks, garbage collection and so on. Heavy duty is the smallest segment, nevertheless important. I told you at a certain moment in time, you have to focus.
Well, from now on, I'm going to focus my talk on the green part of the graph. So from now on, we talk about transportation. I will focus there. And in our case, transportation means NMC type cathode materials. Where is that growth acceleration coming from actually?
What is changed compared to 3 years? How have we maybe been misled? Or what kind of ideas did we have in the past that were completely wrong? Well, honestly speaking, not that much, but the regulator has further pushed the button. And I'm going to give a bit more details on 2 important regions.
Pascal has 3 important regions. I focus on only 2, but 2 the two regions are actually the same. I will focus on China, subsidy scheme, credit system and then the third one is Europe. So what has changed compared to 3 years ago when we met in London? That is amplifying, that is accelerating actually electrification.
Let's have a look in China. The Chinese government is rolling out a 2 track promotion subsidy incentive system for electrification. Two tracks. The first track is impacting or is influencing the carmakers, And that's through a new credit system that they launched in April this year. This credit system is promoting actually higher technology, higher driving range, higher performance vehicles.
The target of the government is partially through this credit system to increase the number of NEVs, so new electric vehicles, to increase that number approximately €5,000,000 by 2020. With this number, China is going to be 40% or more of total ex EV market. So this slide alone shows the critical importance of China as a market target market. The second element of the policy is NEV cars, it's basically similar in a sense to the credit system, similar in a sense that they promote higher performance, better batteries, higher energy density. That's the target.
And we've seen a similar system for e Bus, higher range, higher subsidy. Improving the technology. What is the consequence of that? 4 years ago, Chinese government basically promoted kettle systems for electrification. Now they switched 180 degrees with the new policy systems.
Basically, they promote NMC because of higher energy density, and that is an enormous driving force for our market. Let's go to Europe. We all know CO2 emission regulation goes in one direction, less. We have to produce less CO2 per driven kilometer. The target is 95 in 2021.
The numbers published by the European Environment Agency for 2017 show an average emission of 118 gram per kilometer. This is higher than 2016. Everybody is expecting now that even for this year, the numbers are going to further increase, not decrease as the target is, increase because amongst others the impact of fewer diesel cars being sold. The regulator in Europe has also established what we call a super credit system. As of next year, car OEMs will get for electrified cars, so really low CO2 emission emitting cars, they will get double credit.
They have 4 years to build up credits that they can use later on in 20s to compensate and to include that in the calculation of their average CO2 emission number. So this is critical for them. It's not a coincidence that as of next year, you will see a lot more low CO2 emitting cars coming on the road. This is the background. With all the measures, we expect the European market, the European region market to account for about 30% of total electrified cars in the future.
So China about 40%, Europe about 30%. Total, we talk about 70% of market potential. So if we look what happens in these markets, we really have a good view on where this is going. And this is partially the background of the acceleration. It's not only legislation, it's also perception of society and very important, it's the change of strategy of the car OEMs.
Until a couple of years ago, it was, I almost dare to say, denial, compliance, but now you clearly see that the strategy is changing with the car OEMs. They embrace electrification. They make it a part of their strategy for whatever reason because they have always followed a performance strategy, because they have to make up for things that went wrong the last couple of years. But nevertheless, I sorry, I bring here a couple of quotes. I mean, you are representative for, let's say, global car market.
You see there brands from all over the world and basically all stay the same. We go for more electrification in whatever degree that might be. Cars. It's a very complex situation to be the CEO of a car company today. What do you have to prepare for?
With all the questionnaires, all the customer questionnaires they have, all the marketing teams they have, honestly speaking, none of these smart people know today what we as a society are going to buy in the next 7, 8, 10 years for electrification. So what can you then do? Open the options, keep your options open and be prepared for either long range EV and, let's say, a lower cost, more compliance type car with a 48 volts complementary system on your ICE engine that reduces CO2 emission by 15%. So all degrees of electrification are open and let the customer decide in the end. This is what we currently see.
Coming back to success factors. What do we typically do? How do we try to bring value for the customers? What did we maybe do different than others in the last 10 years that gave us the position of today, And what are we going to focus on in the next 5 to 10 years to further increase the gap? The title says it all.
I mean, it takes a lot to play in the automotive League. I compare that with soccer. Do you think that the teams playing in the European Champions League, all the teams qualifying for European Champions League, do you think that there is low quality teams in there? No way. To get there, you have to be the best of your country, otherwise you don't get there.
Take motorsport. If you are a team of Formula 1 and even if you are doing 6 in the championship, do you have bad engineers? No way you don't. But I mean somebody was maybe a little bit smarter than you were. The same is true in this industry.
Supplying for Automotive today, there is no low segment. If you supply to Automotive today, whatever kilogram you sell there for cathode material, this is high quality and this is a high segment product. What do they actually want? What do we have to supply? 1st of all, high quality.
Yes, high quality. What is that? It has to be custom made for different types of XCD. I hope I already could convince you that there is not just one type of product or one type of cell that fits all. That means you have to customize your material.
We have to provide that in massive volumes. We have to do that fast and flexible because you can make 10 plants for the next 5 years. You can be damn sure that it's going to be the 11th scenario that will happen in reality. And you will have to reshuffle. And you are going to ask as a car OEM, as a battery maker, you're going to ask flexibility from your material supplier.
We have to do that at a competitive price. This is the key component of a future car. It's the biggest cost component of future cars. There is no relaxation on price or on cost price. There will be always pressure.
And last but not least, the materials that are being used serve a sustainable application. Because out of a certain conviction. If you do that, would you be happy if you hear that in the supply chain corners have been cut somewhere? No, you would probably drop that brand the next time. So we have to bring materials with a very clear and clean ethical sourced raw material.
What is Umicore setting against these requirements? I hope I can together with you, we can go over all these numbers. I can tick the box. I mean, we supply, we sell, we develop different products, quality requirements. I mean, I've recently not seen any specification document being signed with our customers with less than 20 items.
That's the situation today. It's different than Portable Electronics. I mean the technical, the quality requirements go up by the platform. Just like the emission control limits get harsher, also for us quality requirements get more strict. We provide a wide family of products.
I will I'm happily inviting you tomorrow to show and to let you feel that we have very strong industrial capabilities that we know how to scale up. And then last but not least, scale is definitely bringing us scale and technology is bringing us cost efficient processes. And Mark earlier on explained that we are a front leader in sourcing in a sustainable way our key materials. Summarizing on that part, what are the 3 key elements that I want to offer to our customers? It's product technology.
It's process technology because for long lasting platforms, this is going to determine their cost competitiveness and my cost competitiveness and its supply. We talk about huge volumes. A car OEM cannot accept that they are going to do all these investments, that they're going to roll out an electrification strategy if after 3 years they realize one of the key partners in the supply chain is just not able to deliver. This cannot happen. I try to visualize this a little bit more, talking about, let's say, an overall development cycle of a product.
We start by synthesizing different compositions, different products, couple of grams scale, really in the lab. This is the starting point. Product technology, you introduce from the first 10 gram you make. And it's not only cathode material. I mean, cathode material is produced out of an intermediate.
I can show you plenty of graphs where I make a correlation between some product parameters of the intermediate and you will see a perfect correlation with the performance of the cathode material after this product has been heat treated to a certain level that you don't want to bear. And you will see tomorrow what that means, a heat treatment. These products have a memory. Sometimes I get a bit nuts, right? But these products have a memory.
They know what happened in their life before, even before they have seen 1,000 degrees. So you don't have to master only the kettle making step. You have to master everything. You have to master precursor production. And a precursor is produced out of metal.
I need pure metal. So all that comes together in, for me, product technology, and we do that for different grades. Once you have an idea on I will make product X and you see some interesting performances. You will bring this to scale. I already mentioned right now in the development of electrification lithium ion electrification, speed is of strategic importance.
A carmaker is typically testing its cars over at least 2 seasons, meaning they do winter tests up north in Europe for instance, they do summer tests where it's very hot. If something or if you miss one deadline, the 12 month test cycle of a prototype is screwed up and it becomes at least 18. If there is something that today, me as responsible of this business do not want to go and explain to car OEM development team. It's that I missed a time slot during the scale up. So scaling up product technologies right now is of extreme importance.
And scaling up is not something you learn at university. I've done a PhD myself. I had no clue what industrialization was. I dare to say that as a chemist. Scaling up is not something you read in published patents.
Patents are about products. It's not about how you master processes. Scaling up is in the gray mass of 100 people at Umicore. That's what it's about. And I'm proud also to give these people recognition and somehow the floor because in the end, it's thanks to hard work and perseverance like I said on the technology front that we are today where we are.
This brings us to industrial capabilities. I can't waste 10 or 15 minutes here on trying to efficient as seeing tomorrow what we are going to do. And I'm sorry, I have now to apologize to people following on the webcast, people here in Korea, we can at least give them the feeling, give them a flavor of what we do in reality. And you will see you will understand in battery materials today what scale means for Umicore. This is our definition of scale.
And of course, our business fits perfectly in the closed loop model and also we offer more and more and we interact more and more with cell makers and car OEMs to close the loop. Closing the loop goes from taking back production scrap of the cell maker, taking back off spec materials during packaging, pack making, that happens, that things get off spec along the road or taking back crashed car batteries for now and finally also end of life batteries. I'm looking forward as a battery materials developer, I'm really looking forward to receive more recycled batteries in our plant. For the very simple reason that it gives me peace of mind, I know where the material is coming from. And I also know that whatever atom that I reuse is of the best and the highest quality I can ever buy.
I've made it myself. I purified it myself and we do this in a way that allows me to produce high quality cathode materials. Maybe today we talk about, I don't know, 10%, 15% that can be recycled, that will come back into the flow. As long as the market is growing stellar as it is today, it's impossible to feed the market or the new flow with recycled stuff. But as we go further, as we develop further, the fraction of recycled material is going to increase and is basically going also to help us in a sense to stabilize our quality and to further increase our the performance of our products.
So being successful today is a combination of developing in time a product, listen to your customer what he wants and then bring that to scale in the fastest possible time. Where do technical product requirements come from? If you look at the wish list, I made a wish list along the value chain for electrification and then I try to translate that into product specifications. Sometimes I wonder myself as well, why the hell are you now asking again an additional requirement? Why do we have to measure that?
To increase complexity? Hope not. To increase cost? Probably not. There must be good reason for it.
Let's go together through that. If you look at the let's say the chain of customers we have below us, we have, of course, directly the cell maker, then the car OEM, the regulator somehow, it's a stakeholder. You can argue whether it's a customer, but let's call it a stakeholder. And then finally, the customers, you, me, my brother, my sister-in-law and so on. The cell maker has certain requirements and his wish list, let's say, depends on technological choices that he has made.
You have cell makers who have decided to make cylindrical cells or you have people who may decide to make poached type cells. The type of cell they make is imposing certain requirements on the products. And it can be completely different depending on what they have chosen. But the market is very diverse. You have people have chosen for 18,615s or now 21,700s like Tesla.
You have people who go to 120 hour hard case prismatic. This is imposing completely different demands on our products. Secondly, what kind of electro technology have they chosen? How do they produce cells? You have people who wind their cells.
So they basically they roll the electrodes. So basically the electrode is bent slightly in a circle. You have other people who stack, so who cut the electrodes in pieces and really nicely stack the electrodes. So the electrode is never really bound together. That is asking again other things to me.
Can you imagine if some people is folding an electrode really 180 degrees at the neck where the folding is taking place, your electrode, your material needs to be kind of glued to the substrate very well and it has to show elasticity. If not, it just breaks and it peels off. Gone cycle life, yes? So somebody who is stacking, he doesn't care because he's never bending electrodes, But he's cutting electrodes in the production process a lot. He cannot afford that while cutting product is kind of jumping left and right and contaminating all other stuff.
So this may sound all very, I should say, trivial. But industrially, if we talk about 700 gigawatt hour in a couple of years from now, this is not trivial. I invite you to be with the production engineers of a cell maker. They break day and night their brains on these kind of things. And that is imposing on how we should make and cook and design cathode materials.
Commodities, you think? I'm not so sure about that. The solvent. Today, the first thing that people do with our material is basically they make a slurry. That means they have a solvent, a liquid.
They bring cathode material inside and they make a kind of ink or paint. You can compare it with the paint. The solvent today is an organic solvent, it's called NMP. Now NMP is not one of the most nicest chemicals going that far in Europe, for instance, under rich regulation that it's going to be put on, let's say, the most severe list and is the end game is banning NMP. This means that cell makers today are actively looking, certainly the ones who go and produce in Europe, to change the use of NMP.
It's hazardous. It's costly. You have to recycle that, so that makes their production quite complex. The most obvious solvent is water. It's cheap, abundantly available.
The problem is a little bit with water. And yes, as a cattle maker, we are often the party pooper. The products contain nickel. They are sensitive to, let's say, attack by water or at least that the product is influenced by contact with water. We have developed technologies that really prevent that.
We have shown we are selling today cathode materials that are being used in water based processes and coated industrially without any, any performance impact on cell. Future Technologies are even looking at eliminating solvent at all, so really printing cathode material on a dry basis on the electrode. These kind of industrial decisions impose requirements on a cattle material producer. And then size. When you make, let's say, a 21,700, so now the cylindrical cell, most common cylindrical cell, the capacity is around 4 amp per hour.
So that's also why I put this one here on the slide. A shortcut in that cell is caused typically just by 1 micron size, a couple of micron size, one particle is killing the battery. If you produce a cell of 40 amp per hour, so 10 times bigger than a cylindrical cell, a very same single particle is killing that cell for short. What does that mean for me? That the product has to be at least 10 times more pure to reach the same yield at the cell maker.
Please realize in the future people think about making sales of 120 amp per hour, 150 amp per hour. So today, commonly used already in industry is close to 100 amp per hour. We soon shift to 120 amp per hour. So that means that for a 120 amp per hour cell, Umicore is making material that is 30 times purer than for, let's say, standard used cylindrical cells. That's what I mean playing for automotive is playing like in the Champions League, right?
And tomorrow, I invite you the ones here, I invite you tomorrow. We're going to visualize that. We're going to show what that in reality is. I mean, I'm going to give I'm going to learn you a new expression for seeking a needle in a haystack. As of tomorrow, you will have different nomenclature for that.
A car OEM. He has also a wish list and not just a small one. How does he approach safety? On cell level or on system level? That's a big difference from a material maker point of view.
What kind of strategy is he driving? Compliance or embrace? Remember, stepping really massively into electrification means that he wants to offer maybe more performance. He wants to offer maybe a high range. So this is determining material choices.
And another one that I would like to highlight is warranty. Warranty is for carmakers a big headache because there are huge liabilities involved. And it's very critical for them how they are going to approach the battery warranty, how are they going to achieve guaranteed performance after 8 years. You have people who do that by, for instance, introducing an active cooling system, making sure that the battery runs during operation, you always add very similar temperatures. So don't add that by doing that, you are not stressing the chemistry inside.
There are other approaches. You have people who say, okay, I will not use active cooling, but I will be on the very safe side in material decisions. I will not use a cell that they charge to 4.3 volt. I will stay at 4.2 and I will have less capacity, but I don't add active cooling. So all these things really impact what kind of material choice you're going to have.
The regulators.
I explained already what happened in China. It's very clear that the way the regulator further defines incentive schemes and so on is impacting technology choices. On cattle material level, whether I mean, that's hard to believe, but in the end, that's a fact. The decisions taken by governments basically impact what kind of material choices we have to make. And then last but not least, the customer.
What is important for us if we buy a car? Do we focus on TCO? Or is maybe for somebody range of absolute importance. Most likely, if you go for a TCO offer, the car will have a different kettle material than if you would go for the absolute highest range kilometer range. And who knows today in 5 years or 8 years from now what we are all going to choose?
I don't dare to bake my bets on that. Obviously, the car size. Light duty, heavy duty, ebuses, the car size determines the battery size. And as I will explain you, battery size has an impact on what kind of materials you want or you eventually even cannot use. If we bring now all this together for the different wishes from the supply chain or the value chain, you can wrap that up in a set of cell specifications, cell performance specifications on safety, on capacity, warranty that you have to give, power, cost and cyclability.
That's what it's all about and that's what we have to serve with cathode materials. How does that translate now? A cathode material has different specs, and you basically can group them or bring them in 2 groups. The first group is what I call product specs. It's about how does the product feel, smell, looks like?
Of course, in reality, it doesn't smell, but and it's all black powder. But you know what I mean. I mean, it's about physical things, yes? What does it mean physical things? Particle size.
How much more than 5 micron or 10 micron or what's the largest particle that can be in a big bag of material? I mean, these kind of things. What's the purity? What's the composition of NMC? How much nickel?
How much magnesium amort? I mean this is a product specification. The second group is about performance. As a material maker, I have to offer product that gives a certain performance in the cell. I'm not making the cell, but I have to guarantee that.
What do we have to guarantee amongst others? Of course, safety performance, capacity performance. Cycle life is hugely determined by the characterization of Cattle Materials. All that all these requirements and these requests basically ask for a tailoring of different chemistries and different products. When you read certain market reviews, market reports, technology reviews, I'm kind of smiling in my seat in the airplane.
That's typically where I read these kind of things. Smiling when I see when people say like there are 4 types of NMC. Come on, guys. I mean, there is more than NMC 111 and 532, 62 and 811. It's just like the world is only 4 grades.
There's much more than that, yes? I mean there are an infinite amount of combinations possible. I'm not advocating for this complexity because I have our operations director in the back. That's a nightmare, of course, for the operations and that's not the way we want to go. But at least I want you to understand that within a family, a big family of NMC and even within NMC 111, you have so many subgrades that all serve a different specific customer that all serve a different specific customer application.
Let me summarize a bit now. Per segment of transportation and per performance specification of the cell where I believe that different NMC grades are more or less suitable. And I have prepared this heat map for 4 segments: Battery V long range battery EV mid range PHEV and then heavy duty e bus type. And the graph shows from the left to the right low nickel NMC. So let's say NMC 111, that's 30% of the transition metals are nickel.
And then on the right side of the graph, high nickel NMC. The end of my heat map or my heat bar is really high nickel. Think of 95% nickel. This is today, I mean, being tested in labs. This is not being used in the industry at all because the customers cannot handle that product, but I just want to show how things evolve over that nickel axis because it's usually a very hot point of discussion in the industry.
Looking for long range battery EV. Let me guide you through this one. If we look at safety, lower nickel cathode materials usually offer a much better safety than higher nickel. I think this is commonly understood and agreed upon in the industry. The more nickel you introduce intrinsically, the more difficult it gets to keep your cell and or your system safe.
Driving range. With low nickel, it's difficult to get to the necessary driving range. Durability, the less nickel, the better the product holds upon cycling. The more nickel you introduce, the more difficult it gets. I'm not saying that it's impossible.
I'm putting it here yellow or orange, but it's getting more difficult. On the cost side, the lower the nickel, higher the all know today that we are at high cobalt prices and this can be pretty painful. On the other hand, going to high nickel gives you also a cost disadvantage. Power because of the big battery, there is usually not really a constraint. This is for long range battery EV.
If we go now to the mid range, it's a similar pattern. However, you do have less constraints on the range, for instance, with low NMC low nickel NMC. An interesting one is PHEV. For PHEV, you basically load the battery very heavily. You cycle a lot.
It's a sizable battery, which means that the use of high nickel gets pretty complex in terms of cost and durability. I mean getting a PHEV to cycle 5, 6000 times over its lifetime and still having a performance with high nickel products, that's at this moment in time a real, real challenge. And then last but not least, more bigger systems. For bigger systems using high nickel, I mean, you are limited with the safety. Having a 3 50 kilowatt hour high nickel battery on top or below a bus chassis, I don't see that happening very soon in terms of safety.
And of course, these kind of systems are less volume sensitive, but they are very price sensitive. So you get into trouble here as well. If we combine all that for transportation, where do we see the use or the how are different NMCs being used? Well, basically, you see depending on the range on the subsegment and then the nickel composition that specifically at the extremities, you have some difficult usage. And in the middle, that's where the compromises in the industry are being sought at this moment in time.
Product technology. Of course, process technology is another important element that is supporting our growth and our cost efficiency. Fast growth from lab to industrial scale and guaranteeing high product quality at industrial large scale volumes. This is really at this moment in time pretty key. Being cost efficient, obviously, how can you do that?
Control your capital intensity. I think at this moment in time, thanks to our process technology and equipment being used, we control this very well. We have introduced a couple of years ago really high throughput production processes that's differentiated us from others and maximizing 1st path yield. I think 1st path yield is critical on the cost side in our industry. That brings us really to the total package.
So we bring industrial capabilities for excellent products and we do that in a cost efficient way. Where are we with our expansions? We are expanding right now in Korea, getting close to the expansion. In China, we are in the midst of it. We are on track.
We have communicated earlier this year that we project 100,000 ton sales in 2019. And with the current expansion plan that we have communicated, we should reach at least 175,000 tonne cattle material production in 2021. As I mentioned, currently Korea most advanced, China following suit. And in Europe, we have decided to increase our efforts on the process side. So we are going to increase the efforts on the process competence in Belgium.
And as we communicated last week, we have selected a site in Poland. That's a city of Nyssa, south of Poland, where we are going to be operational towards the end of 2020 to serve the European market. Our position in the market, I would say, is unique in that sense that we combine scale, geographical presence and recycling capabilities. So we cover, we span the supply chain from raw materials coming out of the mine. We source pure metals there where needed and where we can and then we transform that into an active cathode material.
That helps us to be extremely agile in this industry. Mark has mentioned the recycling. There was already one of the questions going into that direction. Where do we want to go? I think that has been addressed.
Today, we have an industrial demonstration unit. And in, let's say, 5 years from now, we definitely see there the potential to further industrialize that and to combine it with the production of our cathode materials. Increasing the gap, I hope I could help you to understand where we are and that we have definite plan to continue to do so, that it is based on technology and market leadership in that area. You're not going to be a leader in this industry if you don't master your cost well and also and that aspect is very critical to be successful in the future. And then of course, last but not least, this industry will need strong ties almost, let's say, from mine to consumer.
I'm coming to the end of basically of my talk, at least if this wants to accelerate, yes. So what do I want you to remember tonight at the dinner table when I ask you the question? There is a huge market. There is a huge and massive market demand. I think I've at least I hope with explaining the background on where the technology requirements come from that there is a trend to product customization, not commoditization.
And last but not least, I hope I could also convince you that Umicore's today and in the future, uniquely positioned to grab a big share of this massive market demand. And with that, I would like to conclude. And I think I have to invite Mark to the stage for a Q and A session.
Actually, we're going to have probably the Q and A session in 2 sections. So we're going to start now with 15 minutes so that we stay on schedule with the day's agenda. And then we'll have another section of Q and A for Kurt later in the day before we close the session. And as you understood from Kurt's closing remark, we will also quiz you tonight during dinner. A reverse Q and
A. It's Tom Wrigglesworth from Citi. Guess to keep my question high level, can you see any technologies that are in development today that will solve or provide and address a large number of the challenges you face in process and manufacturing? I guess I start that question with solid state batteries in mind, given you were talking about the heat management, the safety, the processing, etcetera. So So is there going to be a it won't be a single shot solution, but can you see a step change coming already?
Thank you.
The answer is no. There isn't going to be a single technology that will solve or that will address all the challenges. And for more details, I would ask you to bear with us because Danigle Ford, CTO, is going to explain that this afternoon and is going to outline the innovation road map and including elements such as solid state and how solid state why solid state could make sense.
Jean Baptiste, Stranholm Bank of America Merrill Lynch. Very recently, one of your, let's say, a company which you expect to become a more significant competitor within the next 10 to 15 years claimed that ultra high energy density grades would become would basically account for about 50% of the overall cathode market. So I'm just looking at the heat map that you presented, and I'm just wondering, would you expect this sort of average industry consensus between low and high nickel content to actually be shifting to the right within the foreseeable future?
Maybe the first element of my answer is that it's not because you go to a high nickel that, that would go or that, that would translate in the high end of the market. From for me, automotive market is basically all high end. And nature is nature. Every percent of nickel gives a certain capacity. And I mean whether you're company A or B or C, we are not going to transform nature.
So the capacity is linked to the amount of nickel being used. I don't see there any specific change or any step change being able to be made by person 1 or person 2.
Yes. And it's not going to be a binary market from a product technology point of view at all, far from that. And it's going to be a market which will be characterized by a wide spectrum of product technologies meeting a wide spectrum of requirements from the customers at large. If you bear in mind what Kurt presented about the requirements from each participant in the value chain, the cell makers, the car OEMs, the customers, etcetera, these are plentiful. And actually, the way you have to look at it is the number of permutations, considering all the possibilities that these permutations mean.
So it's going to be a play, a technology play requiring a vast portfolio of technologies and nothing that looks like a binary market.
Mark Newman from Bernstein. I appreciate there's lots of different types of chemistries that are always going to continue for the long term. But I'd appreciate if you can give a little bit more information on Umicore's blend today in its chemistry within NMC and how that might change going forwards because I think the 2 big trends we're seeing at the moment is cobalt price has gone up a lot. At the moment, I think cobalt is about 10x more expensive than nickel. So that motivation to go to high nickel content is getting higher and higher.
Plus, of course, a lot of the new EVs that are coming out in the next few years are with longer range. And so the motivation again towards high nickel content is getting higher and higher. So I think it would be very helpful to talk about what Umicore's blend is today. For example, NMC 111 is X% percent or any kind of comment you can talk about that? And where you are in the move to high nickel content going forwards?
In terms of, let's say, our blend, I think I mean, I explained that offer a wide set of compositions and that we really fine tune these compositions depending on the requirements. And our blend is a natural historical blend. I mean, the technologies evolve over time, and our business and our activity is purely reflecting that.
Well, I would put it somewhat differently to add to that response. Customers and we produce what the customers require in function of the application requirements as was demonstrated by Curt. There isn't a Umicore blend or there isn't a Umicore product. There is a vast portfolio of products and chemistries that we produce. This afternoon, during the technology presentation of Denis, Denis will also explain and demystify some maybe conceptions or misconceptions about the high nickel because you pointed out things that nickel brings, like for instance, higher range and costs differential compared to cobalt.
Denis will also bring you a more balanced picture by also explaining what you give up in terms of characteristics and performance when you use more nickel relative to cobalt. So I think it's important to understand the trade offs that the customers have to make when selecting chemistries. It is not only just a matter of higher nickels being a Holy Grail that brings everything lower cost and higher driving ranges. It's a matter of trade offs, and this will be outlined in more detail this afternoon and will also help you understand the complexity around the questions that you've raised and the reason why having a vast portfolio of technologies makes a lot of sense to play in this market.
Wim Hoste, KBC Securities. I have a question on raw material sourcing. With the accelerated scenario you now provide, are you confident there will be enough metals cobalt and other metals out there to accommodate for that? And how do you see the kind of metal pricing risk to your accelerated growth scenario?
That's indeed quite a big concern, the raw materials availability. In absolute terms and also in terms of timing because in certain cases, you can think of new sources that could come on stream in the future. And the question is, how fast will that happen? And when I raised the question earlier in my presentation about how much faster electrification can go, clearly one of the limiting factors today is the time it takes for the supply chain upstream to develop and to grow and to adjust to the kind of growth rates that we see today on the demand side.
I
would answer to your question also by saying that without recycling in the long run, the bottlenecks to electrification will be significant. So recycling will be a major contributor to the electrification by easing the scarcity of certain raw materials like cobalt or certain others clearly. So without recycling, there will be a limit to what to how far we can go with electricity. The other aspect is that I don't see again, I repeat myself, I don't see one technology or one family of chemistries taking the entire market for two reasons: 1, because it's there isn't one solution that addresses all the requirements that have just been presented and secondly, because in many cases, the technologies to cleaner mobility are hitting raw materials constraints, whether it's an absolute value or in terms of timing. So I think electrification can get where society wants it to go using a combination of technologies provided recycling kicks in, in a significant manner in due course.
Chetan Udeshi, JPMorgan. You mentioned the trend towards more customization of different grades. Is that coming from OEMs, auto OEMs or battery OEMs? And is there a risk that with more customization, some of the IP is then owned by either the battery OEMs or car OEMs and users become a blender as such in the long run?
Thank you for the question. Actually, a very, very relevant one. I think the request comes from a combination of the 2, and it is either linked with the performance of the cell or sometimes linked with how cells are being produced. In terms of IP, that's more or less defined on product level. So I would say we see there even quite a bit of opportunities.
I would like to refer, for instance, to the example I gave to make products for water based systems or even for dry coating. There are quite a bit of requirements asked from us as a cathode material maker. So I really see that as an opportunity for us to differentiate and to excel actually.
Yes. And actually, there is an analogy with the catalyst industry where indeed the automotive industry relies on the leading catalyst makers to come up with new and innovative formulations to meet ever more stringent regulations and where the catalyst makers are not or have not developed into tall producers that are actually just making the recipes or producing the recipes that are owned by the carmakers. So we see the same model developing in the electrified drivetrains technologies.
Yes, good morning. Thank you very much for holding this meeting. I had a question. I wanted to go back to the high nickel discussion just a minute ago. Just curious, I guess, the reason there's so much interest about that is we're trying to understand what the economic impact of this transition will be.
And I appreciate that there won't be one solution, and I think that's really helpful to note. But we kind of all need to make our assumptions as to what where we evolve to and if there are different solutions for different parts of the market. But at the same time, as far as Umicore is concerned, can you just help us get our heads around, is high nickel good for you or bad for you? Or it's just a don't care and you can evolve to basically experiencing the same type of economic benefit you do with low net coal type of strategies. I think that's the kind of one question that you could really help us get comfort with.
Appreciate that.
It's very hard to predict where the market will go. I mean and that's basically also what I tried to gave as a key message. In the end, you and me and society, the regulator will decide what the technologies of choice will be. And in the end for us, as I've shown in the beginning, all these materials are layered docksides. And as soon as the customer is asking them either a low nickel component or a high nickel component, we have the capabilities to develop and to produce that.
And from a and adding to that, if I want to address in a possibly more specific manner your question about the margin level, the economic benefit impact, we don't mind. We don't mind. For us, it's about the same because of because we have the technologies, we have the products and we have the industrial capabilities. And I would like to reuse a sentence that I've used earlier in another context. It's not an aspiration in our case.
It's equipment that is on the ground that is producing. We have versatile product technology process technologies, sorry. So the product can be made is being made at the request of the customers. And from a margin point of view, we don't mind. So the mix is going to be what the consumers decide depending on their requirements and depending on what they buy.
So for instance, I drive a PHEV with Umicore Materials, of course. That's a key selection criteria. And I need a robust battery because I'm going to be in a configuration Kurt alluded to earlier with 1,000 of charging discharging cycles, not 100, 1,000 because I'm charging during the day when the car is in the underground parking in the office, and I'm charging home overnight. So over the warranty life of the battery, which is 8 years, I'm going to have thousands of cycles. So high nickel is not relevant for me for that model of cars that I've chosen so far.
Its robustness of the battery is more important, is more relevant. So again, we don't know where the mix is going, and we have prepared ourselves actually to be able to deal with any mix depending on where the consumers decide to go. We will take a last question for this session, and then we will have a chance to extend the Q and A on this topic sometime this afternoon.
Hi, Ronald for Redburn. A quick question on the guidance to your output capacity of 175,000 tonnes. As I understand it, the higher grade nickels have a much slower production output throughput, the multiple sinterings, for instance. What is the mix assumption in your tonnage? Or how do you derive that?
We have basically we have made a rather conservative assumption in defining that number. I think depending on which direction it goes, I don't see us getting in the end below 175,000.
Well, because conservative because in a way, we're talking about 2021, and things are known pretty much for that period of time between now and 2021. So there is a significant proportion of higher and high nickel products in the assumptions. And it's probably overstated considering what we see as the market take up rate and how we see the market take up rate progressing nowadays. So that's why we mentioned at least 175,000 tons because your observation is absolutely right. The throughput is not the same.
Okay. So I'm sorry that we have to break this Q and A session for now. But again, there will be more occasions to come back to that subject later in the day. And so we'd like us to stay on schedule because we have a pretty full program for now.
So welcome back, everyone. I hope you enjoyed the small cultural escape. We are now ready for the last presentation given by Denis Gafford. So Denis, it's the floor is
yours.
Thank you, Evelyn. Good afternoon, everyone. Glad to be here. Kurt talked a little bit about the last 20 years, what has made us what we are in Rechargeable Battery Materials. I'll try to draw a picture of what we are going to do in the next 20 years.
So it is about our innovation roadmap in Clean Mobility Materials. I will try to picture a little bit the why and the how we are working on these products. So first, some background information on what we call the well to wheel efficiency. Well to wheel efficiency is actually a way to picture the efficiency in transforming oil, crude, fossil fuels into motive energy. Well to Wheel is made of 2 components.
1 is the well to tank. So this is the energy that you are using to extract, transport and refine the crude into a usable fuel, gasoline, diesel, whatever. And by extension, we are going to use the concept of well to tank to characterize the efficiency in transforming this fossil fuel into electricity because this is going to be useful as a comparison for electrified vehicle. And then you have the 2nd component, which is called the tank 2 wheel, and this is what happens actually in the car, and this is the efficiency in which you transform your fuel, your chemical fuel into motive energy. So if we look at tank to wheel efficiency, which is very often the main focus of the automotive industry, nothing can actually beat the battery electric vehicle.
You'll see that BEV has an efficiency of up to 90%. Why? Because an electric motor is actually a very efficient way to produce motive power starting from electrons. The electric motor also is fairly flexible in terms of torque and power. You can a fairly wide range of rotational speed provide very good torque and very good power.
And especially if you that's one part. This is the electrical motor. You have also the power electronics and the battery. And power electronics also have pretty high current efficiency increasing over time with new semiconductor being introduced. And the battery is in most of the conditions is also a fairly it's fairly efficient to extract electrons from a battery.
So all in all, we can reach efficiencies in the range of 90%. This is a big difference with internal combustion engine because there, we are more in the 25% to 30% average efficiency. Why is that so? First of all, there are some thermodynamic consideration. There is something called the Carnot cycle, where depending on the temperature, you cannot go above a certain efficiency.
It's actually very difficult to transform heat or thermal energy into motion. This is an internal combustion engine is really a marvel of technology because you basically transform heat, the heat produced by the combustion of the fuel into motive energy. So we get to this 25% to 30%, partly because of thermodynamical constraints, partly because the interconnection engine works in a very narrow range. And so that's why we have gearboxes in normal cars. And that costs some efficiencies.
So fuel cell is somewhere in between. It has some thermodynamical limitation as well, but you benefit from the efficiency of the electric motor. So all in all, it's around 50%. So if you look at this, you may wonder, knowing that the electric motor exists for more than 200 years, the batteries have been invented more than 100 years ago, Why are we still using internal combustion engines? There is a good reason for that.
This is the energy content of the fuel. So here, the comparison is a little bit unfair because for the gasoline, diesel and hydrogen, I'm counting the energy content of 1 kilograms of the stuff. I'm not counting the tank, the pipes, the all the ancillary equipment. This is really the energy that you have in 1 kilograms of gasoline, 13,000 diesel, same range hydrogen, much higher. Of course, it's 1 kilo of hydrogen.
The volume it would take at normal pressure is a bit larger. And in hydrogen, actually, the tank is not negligible because you need to handle 700 bars, so you need thick carbon fiber. And so in terms of handicap in terms of energy density, this is more relevant than for gasoline and diesel. Now if you look at lithium ion battery, you have all the container is there because the chemicals, the battery itself is actually what stores the energy. But you see that there is a factor, nearly an order of magnitude between these.
And this is what has limited the penetration of electric vehicle for a long, long time. Now that being said, these extremely high efficiencies and the fact that you can have low CO2 vehicles is worth the effort. So you would understand easily that our main focus is there to improve the energy density of the battery. Now if we translate this percentage into gram CO2 because you can do that. When you have an efficient process, you basically burn part of your fuel and this creates CO2.
So you can express these efficiencies in terms of gram CO2. You'll see that and the purple part is actually the tank to wheel. The green part would be the well to tank. And in many cases, when we talk about gram CO2 for cars, we look only at the tank to wheel. The well to tank is actually proportional because there is a certain percentage of energy that you lose during the extraction, transport and conversion of the crude into usable fuel.
And you see that even if we look at the 95 gram per kilometer of the target of 2021, it's going to be difficult for gasoline and even diesel to reach these targets. If you look at the right side of the graph, then you see that for life is much easier for battery electric vehicle because actually you will only you will not produce any CO2 during conversion, during when you're using the car. You only have the CO2 that has been produced during the manufacturing of the fan, the manufacturing, if we can say, the production of electricity. Now maybe coming back to internal combustion engine, you'll see gasoline, diesel, compressed natural gas is a little bit better. You can improve the efficiency somewhat by going hybrid.
You reduce the overall tank to wheel and the proportional well to tank. If you go plug in hybrid, then you have a mix of electricity and fuel, and you can get much lower in terms of gram per CO2. This is all calculated for a C segment car, let's say, the size of a Golf or something like that. The emission for the electric vehicle, you see that there are 2 values. 1 is when you start from full renewable, then you have basically no CO2 emission.
The other one is based on the EU mix expected for 2,030. So it obviously depends on how much coal versus gas versus nuclear versus renewable you have in your mix. Europe in 2030 will be around 300 kilowatt 300 gram CO2 per kilowatt hour. So this will give this picture. If you are in China, you're probably going to be a bit higher than that.
If you are in very low CO2 countries like the Nordic countries or France, then you will we will be lower than that. So this is this draws a picture that, okay, that's why we go to electrification, and it is very much supported by legislation. However, this is an evolution. This is not a revolution because the electric vehicle cannot fulfill the needs of all customers, cannot fulfill all needs or all uses. And so you will have a mix of this powertrain, an evolution towards more electrification.
So we need, 1, cleaner ICEs, cleaner in a sense of emitting less CO2, but also fulfilling the emission legislation and more and more XUV. And guess what, this is something we like at Umicore. Okay. This is to paint a little bit the picture. Let's look at what we do in terms of active battery material development to reach these levels.
Okay. First, a graph which is expressing 2 values: the volumetric energy density in function of the gravimetric energy density. So energy density is range. Energy in density is in watt hour or kilowatt hour. This is a unit of energy and this is giving you a given range for a given car.
So you want that to be you want the energy density to be as high as possible. But of course, you have limited space and limited weight in a car, so you want it to be also dense. Volumetric energy is actually more important than gravimetric energy for automotive application because the carmakers do not want to touch the usable space in the car. They don't want to force you or me, consumer, not to be able to put our, I don't know, our golf equipment in the trunk or kits in the back or whatever. So there is a limited amount of space available, and you want the battery.
And basically, this space gives you the autonomy. If you have 100 liter at 400 watt hour per liter, you will have that much energy and that much range. Gravimetric is a bit less critical, but it's not unimportant because at the end of the day, you don't want to move to spend a big part of your energy just moving your battery around. So this is where you want to be is actually in the upper right corner of this graph. You'll see you understand easily why we actually stopped doing work on LFP.
We stopped LFP because it is limited. It is You see also that if you move towards iron nickel, you get more density. Kirk mentioned about it. This is electrochemistry. This is thermodynamics.
It is a fact if you move. But these moves are small steps. I mean this is limited. Every percent counts. So it's there is a trend towards more nickel, but this is nickel can only bring you that far.
Okay. What do we do at Umicore to achieve that? We develop products. And products is we can take it in the wide sense. It's cathode, but you will see there is more than cathode in the future road map of battery materials.
But we also develop processes. I mean these are two phases of a coin because you need a process to make a product. And basically, it is rather easy it's not easy. You can make a few grams of a product that is very well performing. The challenge is very often to produce it in thousands of tons because the application needs these thousands of tons.
So when you develop a product, you need a process to make it, and the process needs to be cost effective. So we spent R and D money on both. Now what are the paths what is the path towards this longer driving range? I split it in 3 areas. The first one is cell design.
This is mostly in the hands of our the battery makers, our customers because what you can do is reduce the useless parts, reduce the thickness of the casing. Useless is a big is not the right word because you need a casing in a battery obviously. But if you can reduce the volume it takes and the space it takes, you basically get more energy density. So reducing the these are problem with sound? Okay.
Good. So the cell design is in the hands of our customers, the semi curves. So they can reduce the thickness of the separator. They can reduce the additives, things that are not providing more energy but are still costing some volume and some weight. Very often they need us for that because the materials we are delivering are enablers for that.
If you want to reduce the thickness of your separator and you have a cathode supplier delivering parts which are not well controlled, you are going to pierce the separator, create a short circuit and have a lot of problems. So we are an enabler, but we are not really in the driver's seat for the cell design. This is very different for the cathode material because there, this is really our business. This is in our hands. We make the cathode what they are.
Let's first demystify something. The products that we are all talking about, the LCO, lithium cobalt, all grades of NMC, 11, 1532, 622, 8111, 9 whatever, NCA, they are all part of the same family of product. This is the layered compounds layered lithium metal oxide compounds. So they all have the similar structure. This is what you see on the slide.
So the blue the part in blue is the metal oxide side. So you have a metal surrounded by oxygen. This is an octidrum. So you have the metal and you have oxygen around. And then you have a layer full of lithium.
And this is basically this lithium that you take out during charge and back in during discharge. The metal oxide can be made of a number of transition metals. So there are 3 metals that actually work well: nickel, cobalt, manganese. But each of these metals have specific qualities and drawbacks. If we look at the first one, the first one was cobalt.
And why was cobalt used the first? Because it has a lot of advantages. It is good in terms of cycle life. It is good in terms of power. It is good in terms of manufacturability.
Why? Because the cobalt stays where it needs to stay. It means in the metal oxide site. It does not go in the lithium sites. It is basically stable through its characteristics.
This is solid chemistry. The cobalt stays where it needs to stay. The only disadvantage of cobalt is actually cost because it's a scarce metal. And in portable electronics, cobalt remained used in spite of its cost because it has a lot of advantages. Now if you look at nickel, this is you have a big advantage with nickel, Denergy.
Denergy, you gain a little bit in energy. This is due to the voltage curve. And at a given voltage, you give a bit you gain a bit in energy. But nickel has big disadvantages in terms of safety, manufacturing and cycle life. The third one, and nickel has the bad habit to move in the lithium sites, and then it's in the way.
It actually make it difficult for lithium to get in and out of the structure. And if we look at manganese, there we have a big cost advantage. Manganese is even much cheaper than nickel. Safety is also good with manganese, but the power and cycle life are problems. And it's actually very difficult to keep.
If you would go to pure manganese, it would not stay in this stable layered state. It would move to a spinel, to a different shape. So you can play with these 3 metals. It's a balance. I mean you get pros and cons in whatever.
And what we did is actually, Kurt mentioned that in the 1990s, we were working already on Aynica. We had an eightytwenty. We even had some filed some patents at that point in time in the early in the 90, 90 6, 90 7, 90 8 area. But the breakthrough for the non cobalt products was actually when NMC111 was introduced because NMC was is something that could be used. It could be used and manage cycle life, safety, power and at cost and energy advantages.
So what do we have at Umicore is basically the full spectrum. I mean we have this 33%, this 50%, this 60%, 80%, 90% and more because we can play everywhere there. And some customers are asking us specific composition. Again, our operation manager does not like that too much because it creates a lot of complexity. But you can basically play with the composition.
This is relatively simple in terms of decision taking, then you need to make the product work in a real battery. Now we can consider that we have a toolbox at our disposal to make products with higher energy density. And composition is one of the tool. It's not the only one. I've put here 4 tools.
We have very creative scientists. They have 20 additional tools in their hands. I'm not sure I want to share all of them with you, and of them would be even would be a little bit less relevant than others. But these are 4 main ones that are known and can be used to optimize the energy density. Let's review them.
So we have this tool at hand. And at the end of the day, it's always going to be technology differentiating because you use these tools, you give the product to your customer, and guess what, they come with more questions and remarks than solutions because they tell you that this and this and this and this needs to be improved, changed. This is the way we develop products in interaction with our customers. Composition. Again, it's electrochemistry.
You put more nickel, you get more energy. Each step provides a few percent more. So it's not changing the face of the world, especially if you go from, let's say, 50% to 60% or 80% or 60% to 80%. You see that the difference is fairly limited. But it goes in the right direction.
So if you can manage the disadvantages, of course, you want to put more nickel in your product. But at the end of the day, you always need to tune a number of other characteristics. If you put monocle, you will have problem of safety, so you will need to do something else at the cathode material level or at the cell level to compensate. Same with cycle life, same with power. And there, I believe it's fair to say that our 20 years of experience is going to be extremely helpful because this is not the first time we tune a product.
It happened with lithium cobalt and all the variation we made out of lithium cobalt, it happened with 111 and all the variation we made about 111. So there is more than composition in a product. So if you ask us, do we plan to make this? Of course. We are interacting with our customer, and we will land somewhere with our customer.
Sometimes we will propose something, and they will ask us, no, give me something different because actually I cannot use this as it is, but this one is a much better compromise for me. If we then look at another tool that we have in our box, that will be using the voltage window. Yes, the nickel maybe let me go back one slide. If we talk about the impact of nickel on the energy density of the battery, this is always at a constant voltage. So if you cut at 4.2 volt, putting more nickel will give you so much percent.
But you can also decide to cut at a higher voltage. Standard batteries are normally sized between 3 volt and 4.2 volt. The normal cut of voltage is 4.2 volt. If you stop at a given voltage, you stop at a given dilatiation. So you leave some lithium in your structure because you don't want the structure to collapse.
So if you stop at a given voltage, you have removed so many percent of the lithium. If you cut at higher voltage, you remove a little bit more lithium, gives you more energy density but has other impact. You can gain 8%. So it's mathematical, 4.2 percent to 4.35 percent, you gain 8%. You need to tune not only the cathode material, the electrolyte need also there is a big interaction between the cathode and the electrolyte.
And so either you need to improve the electrolyte so that it can handle the voltage or you can actually tune the cathode so that it does not react in the wrong way with the electrolyte. So we use a lot of coatings and surface engineering to avoid these reaction between cathode and electrolyte. And actually, this approach works very well. This has been used in portable electronics for the last 20 years. Portable electronics went from a cutoff voltage of 4.1 volt at the very beginning, 4.15, 4.2, for 20, 25, 30, 35, 4.4.
So some of you have cell phones cutting off at 4.4 volts. So portable electronics stayed with lithium cobalt, so they didn't have the luxury to play with the composition. And the only way to get one of the way to get more energy out of it was to cut off at a higher voltage. You can basically do the same with the IN nickel product, with NMC with different grade of IN nickel. So one thing that this works nothing is that if you take a 60% nickel and you cut at 4.35 volts, you actually end up with more higher energy density than 80% nickel cutting at 4.2 volt.
Again, you have 2 tools in your box. Use 1, use the other, use both. But know that in any case, you will have to deal with the drawbacks of each of the tools. There we have patented technologies. It's a lot about surface engineering, surface treatment.
We have learned a lot from the lithium cobalt for the same reason. We apply it today to the nickel composition. Let's look at our 3rd toolbox. This one was also very much used in Portable Electronics. This is dealing with the packing density.
Kurt mentioned that there was a memory that he was a bit nuts, that I can confirm, but that there was actually a memory in the product. And it's true. The precursor the shape of the precursor that you make will be kept in the cathode material. So it's very important to be able to control the full supply chain because by tuning the precursor, you are going to tune the cathode material. And gaining packing it better in the battery gives you 10% additional capacity at no cost because there, you won't have at no cost no disadvantages.
You won't create safety problems. You won't create power problems. You just need to manage geometrically, mechanically to put more product in a given volume. And that has to be done together with the customers. So there, too, we have patented technologies banking on our experience in Portable Electronics, but this is totally valid for electric vehicles.
I believe that most of our NMCs used today in automotive platforms are using this technology already, but we can put it even push it even further. A 4th
tool
is that sometimes you decide to go to I. Nickel and then you need to deal with some of the side effects. A side effect which is well known in nickel because the nickel goes in the lithium side, you also create surface impurities in the process. This surface impurity generate gas when you keep the battery at high temperature. So here, this is a standard test, which is done at 90 degrees C, so it's fairly harsh.
But it's not very different from what you would get if you leave your electric car on the top floor of an airport parking in, let's say, Atlanta or Seoul during summer. So you may sometimes have a charged battery being held at high temperatures. This happens a lot happened a lot in the past in computers when you had the CPU eating up the computer and eating up the battery which was plugged and charged. And so we all remember that sometimes we never really used the batteries of our computer, but they were gone very quick. This is because of that.
In case of I nickel, it's a bulging. And bulging means that a pouch cell would increase typically at 90 degree by 100% in volume. So the cell doesn't look like a pouch anymore. It looks like a pack of crisps. It's really bulged like by the pressure of the gas that you put inside.
So this is not good for the geometrical integrity of the cell. Think about that happening in a car where you have a lot of cells pile against each other. It's also not good in terms of safety because if you puncture, then you will have gas escaping. So this is clearly something that needs to be avoided. And this is something that prevents the use of INK chemistries in most applications besides the small cylindrical cell.
A cylindrical cell, because of the cylindrical shape, can actually hold the pressure pretty good. And so if you create a bit of gas, basically the shape of the cell can hold that. If you go to pouch or to prismatic cell, this is not possible. And we have been working on that. Again, it's all about surface engineering to avoid these gas generating substances that are on the surface of the cathode material.
And we have been able and we patented that to decrease the bulging to 20%. So 20% in this specific test at 90 degree means that in real life application, this is acceptable for the customers. So this gives you a picture of 4 of the tools that we have. We have many others, and you can actually use them to increase capacity and energy density in your cells. So one question that I've been hearing a lot from my colleagues, from customers and from some of you already is, is iron nickel the holy grail?
Iron nickel is part of the solution. I mean, if you go to iron nickel, you get more capacity, you get more energy. This is what we want. But there are you need to consider the drawbacks. The cycle life, which in some application will be simply unacceptable, Marc mentioned about plug in, but there are other application where cycle life matters.
Automotive application, you cannot play with cycle life. I mean the battery needs to last as long as the car. OEMs do not want to take any with that. The high voltage stability, if you want to use them at higher voltage, which brings a number of benefits, you have more problem with iron nickel than others. And I would say that in general, there is limited experience of integration by the current sales maker.
Back in the 90 6, 90 6, 90 7, 90 8, 90 9, the product was already available. It was mostly eightytwenty, 80 nickel 20 or NCA. And most customers would say, look very nice, but I can use it in bottom cells in my lab. It gives very high capacity, but I cannot really use it in a real application. On top, performance come at a cost.
The cost of manufacturing, we mentioned it. So at some point in time, is it worth to spend much more CapEx to get a few percent more in your product because the CapEx will be a cost to the customer? So the balance will need to be found on the cost equation as well. And basically, when we talk about iNicol, most of the time, we go to 80, sometimes 90, But above 90%, this is really, really a territory which is not demonstrated at all. So we believe that we can deal with this in the future, but it's not going to be like a miracle solution.
This will be again an evolution over time. So the full spectrum is and will be needed, and we have it. That's the good news. Okay. Let's look at the 3rd path that we have towards a longer driving range, and this is shifting the anode material.
So anode material stayed the same for the last 25 years. It was graphite from the beginning. It is still graphite. Now the graphite, they made progress on graphite. I mean there is R and D done on the anode materials.
The shape is different. The graphite can deal much better with high power than in the past. But basically, the capacity has not changed much over the last 20, 25 years. So what is the idea? It's to replace graphite.
It's not a new idea neither. It's to replace graphite by silicon. Silicon is known silicon has up to 10 times more capacity per gram than graphite, so it's an obvious choice. And if you manage to use silicon, and I will tell you why it's difficult to use a silicon, you can have up to 50% additional energy in your battery. And this is sizable.
Look at the graph. If you look at you could go from, let's say, 20.20 watt hour per kilo to 3.30 counting on the 50% additional capacity. So if you compare the difference between 60% 80% nickel and you look at the difference between the iron ore the iron ore material brings you much more bang for the buck than increasing the nickel. Is it easy? No.
But the capacity increase is large enough to be very appealing to the OEMs. And silicon composite is in the road map of all OEMs these days. So why is it difficult? Silicon has a bad behavior. When you put lithium in it, it expands by 300%.
So if you visualize the electrode and we have taken picture of it live, it behaves like a lung or a bladder. It just goes up, down, up, down, up, down. So the electrode physically bulges. And this can still be managed. If you can make the silicon fine enough, you can still manage the mechanical constraints.
But you have also another drawback is that every time you this silicon expands, you create fresh surfaces. And these fresh surfaces react with the electrolyte and create deteriorates your cycle life. You are actually using part of the lithium and the lithium, which is not available, cannot be used in the battery. So we have developed a unique material. We have worked on it for quite some time, but we have developed product that can actually cope with this variation in volume and the interaction with the electrolyte.
So we are in product qualification. So we are sampling customers. We get extremely good feedback. This will probably will certainly go to other application before getting into XUV, into vehicles. But we believe that this is going to be a very important building blocks building block going towards higher energy density in lithium ion system.
Okay. If we and up to now, we stayed in liquid state batteries. So there was one question this morning on solid state. I will come to that. But even if we stay with liquid state, starting from 33% nickel cathode material, 111, Moving to 90%, you will gain 17%.
You can stop underway. You can stop at 80% or at 60%, you will gain a bit less. But then you can use the low weight cell design, so this is in the hands of the cell maker, higher packing density, higher voltage and then the potentially very high jump by the silicon anode. And you can see that your range can actually increase a lot because you would more than double your watt hour per kilo. So there is still a lot of life in liquid systems.
And the beauty of the liquid system is that you have it is a proven technology. The plants, the battery maker plants, they are designed for it. They can handle it. So you can have drop in solution, new cathode, new anode, more packing density, higher voltage. These are things where you can still use manufacturing line exactly the way it is and still gain a lot of energy.
So the 500 to 700 kilometer range is within reach by evolution, by continuous improvement. No, we are not going to stop there. Let's look at solid state. Just to put things in perspective, let me remind you what a liquid lithium ion batteries most of you know, but you have the cathode material, which is coated on an aluminum foil. This is a cathode.
This is the positive electrode. You have either graphite or silicon composite coated on the copper foil. This is the negative the anode side. You have a separator, which is a polymer. This is a polyolefin, so this is plastic.
Let's call it for what it is. This is a polyolefin. Engineered polyolefin, definitely with micropores, you need to let the lithium through. Very thin, needs to be resistant, needs to be so there is a lot of knowledge in the separator, but basically this is a piece of foil of plastic. And then you need to transport the lithium ions from the cathode to the anode and back from the anode to the cathode.
And what you do, you put electrolyte in it. And you fill with a liquid, you fill the gaps. So you could do it with a syringe. That's what we do in the lab or you do it in automated plant. And basically, it's pretty I will not say easy, but it's pretty obvious that if you wet all the particles then the path for lithium is clear.
I mean the lithium gets out of the cathode, it gets into the electrolyte, it moves its way through the separator and goes to the anode. And then when you discharge, you can basically get it back to where it come from where it come from. Energy density target, 280 watt hour per kilo, 660. This is advanced lithium ion. So this is already beyond what we have today.
What is a solid state battery? First of all, you can replace the separator by the electrolyte. So if you look at the yellow not the yellow strip because this is the lithium metal side, but the yellow bubbles, this is the solid electrolyte. It has a double function. It is the electrical insulator because the role of the separator is to insulate the cathode from the anode to avoid having a short circuit.
So you do it with this solid electrolyte, but the solid electrolyte is also the stuff that transport the lithium ion from the cathode to the anode and vice versa. You see that there are also some yellow dots in the cathode side. Why? Because you need not only to transport them through the separator, but you also need to take the lithium ions from each particle of cathode material and bring it to the anode. So you need what we call a catalyte and the solid electrolyte.
And these are both solid electrolyte, but with different characteristics because one needs to not react with the lithium side, with the anode side. The other one needs to be stable against the cathode material. So what are the advantages of the solid battery? Is that let's no. Let's first look at I describe what it is.
The solid electrolyte is a big enabler because it allows the use of lithium metal as the anode. Lithium metal can be used theoretically in liquid state batteries, but will create a lot of safety concerns. When you play lithium, you create dendrites. The dendrites can pass through the separator, create short circuit explosion, so not desired. Also when you plate lithium, you create a very high specific surface, which also creates a safety problem.
It has been tried in the past. A company went bankrupt because they could not manage it. And basically, people more or less decide that liquid metal lithium metallic lithium in liquid electrolyte better to stay out of that. Now if you replace the liquid electrolyte by solid electrolyte, then you enable the use of lithium metal and this also participate a lot into the energy density gain. So I described the a little bit the way the battery function.
There too, cathode material will be used. I mean a solid battery uses cathode materials, NMC, NCA, LCO, whatever. You can use many different kind of cathode materials, but you still need something that holds the lithium and can where you can take it out and taking it back in. But this is not the plain normal cathode materials because you need to engineer it so that it does not react with the solid electrolyte. The cathode material of today have been designed to interact with a liquid electrolyte.
If you want them to interact with a solid electrolyte, again, you need coatings, you need surface treatment so that you don't destroy the electrolyte because this is a pretty oxidative discharge a charged cathode material. So a dilatidated cathode material is a fairly oxidative material. And then it would try to oxidize whatever it can put its hand on and what is available is the solid electrolyte. So a lot of potential for us. It's we like solid electrolytes.
We will be able to sell more complex cathode materials in the future. And we are actually doing it. We are working with a number of customers at tuning our cathode materials for them to use in solid systems. So many advantages. I mentioned the safety, temperature stability, high energy density, partly because of the electrolyte, partly because of the lithium metal, easier integration into a pack.
You will need to change all the manufacturing systems, but there is potential gain in terms of integration. So solid state is on all major OEMs roadmap for quite some time for some of them, very recently for others. Now the drawbacks are always there. The electrolyte conductivity is a big issue. Making the liquid electrolyte conductive has been done.
It's okay. It works. Even if today, you have all experienced that when you go skiing, your phone has less capacity and shuts down faster than when you are in normal day. This is because the conductivity is also proportional to the temperature. So even in a liquid electrolyte, when the temperature goes down, you start to have problems of conductivity.
Solid electrolyte make it even worse. And so managing the conductivity of the electrolyte is one of the challenges for the solid state battery. The material stability and purity, to avoid all this side reaction, you need very pure and very stable electrolyte. And there are the processing issues you will need basically to change most of the industry. Okay.
What could be next on the road map? Lithium sulfur, lithium air. So the optimistic people will always list the good side of life. Lithium sulfur has a good gravimetric energy and potentially low cost, so it sounds good. Lithium air has a very high theoretical gravimetric and volumetric energy.
Lithium air is the favorite of people doing theoretical calculation because until you start to make it you try to make it work, it's perfect. You reach the highest energy density. But then you need to deal with practicalities like, okay, what do you do with the anode because you are using oxygen, but in fact, you produce lithium oxide. And where do you put it? You need a place to put it.
What do you do with the CO2 in the air? Because it's a lithium air, but actually lithium oxygen. But if you have CO2 in the air, it creates some problem at the battery. How do you manage the fact that you have something which is very reactive with air, the lithium foil, and you need to separate it? So the more you try to get into lithium air, the more the problems you find.
And we have listed here the problem. So back to lithium sulfur, the very low volumetric energy, which makes it unappealing to see the least for the automotive application, limited power, limited cycle life. Today, the typical application for lithium sulfur will be drones or things like that, where cycle life is less important and the weight is the most critical thing. In terms for lithium air, low cycle life is also one of the problem, but the most fundamental one is that this is today still the proof of concept. So universities, academics are working on it, people that get funding, but we are still extremely far from reality.
So we would define that as a technology readiness level 1 or 2. So really ideation level, very far from practical application. So our conclusion is that these technologies are unlikely to play a role in automotive application in the foreseeable future due to their critical limitation. We do benchmarking. We do watch these technologies, but we are not state batteries state batteries than venturing into these besides some niche applications.
Okay. If I want to conclude, the best way is actually to come back to my graph, which we call the Ragon plot between volumetric energy density and gravimetric energy density, you see that you can basically go some way with the nickel composition. The silicon based anode would bring you much higher. And you could draw dots between the 90% nickel and the silicon based anode if you are mixing basically the silicon anode with graphite because you can then have a continuous progression putting every time more and more and more and more silicon. So this still is still ongoing.
And then if you go to full solid state, you would go even higher. You also see that the lithium sulfur has practical limitation. And in terms of volumetric energy density, it's not isn't even worse than the current lithium ion technologies. So we don't see much future there. There are practical limits for lithium ion in liquid state and practical limits in solid state.
So when I show this to our scientists, they don't they hate practical limits. They want to go beyond them. And indeed, if you try to model and to get to the theoretical limit, you could even go a little bit higher for both. The lithium ion could be a little bit higher. The solid state could be a little bit higher than that.
But let's keep our feet on the ground. This today, it would already be so good to be at 1,000 watt hour per liter and 500 watt hour per kilo. It would basically nearly double or triple the range of our cars. Okay. Changing subject completely, let's talk about fuel cells.
Fuel cell is actually a system where you're using a chemical carrier, hydrogen. Remember the 38,400 kilowatt hour per kilo that you get from hydrogen. And use it not to in an internal combustion engine, but to make electricity. So if you put hydrogen and oxygen together, there nothing happens until you get a flame or a spark and then it either burns or explodes. If you want to harvest that energy in an internal combustion engine, then you will still be stuck with these efficiencies problem.
But if you put some catalyst in it, you can generate electricity directly from this reaction between hydrogen and oxygen and use this electricity in a very efficient way in an electric motor. So that's the beauty of fuel cell system is that you have a very high energy carrier, the hydrogen, and a very clean use of the energy, which is electric. And the key driver there is a catalyst. And Pascal would agree with me that we tend to know a number of things about catalysts. We have been working on Shell Cell Catalyst for close to 30 years, also because of our history in automotive catalysts.
Fuel cell has seen a number of hypes and downs and hypes and down, but we see the technology becoming really mature today. This is can be used. You have cars on the road here in Korea using fuel cell. You can buy it. You can order a fuel cell car and use it every day on your commute.
So we have a competitive product portfolio. We have a strong R and D pipeline. We are very well positioned. Our products are on the road in cars that are sold today and are present in most of the development platform of the biggest OEMs. So what are the what is the sweet spot for fuel cell cars is that it provides the best of both worlds.
You have 0 emission like in a battery electric vehicle. Actually, this is not correct. You have emission of water, which is not a big deal, unless it is freezing where you need to manage it. But water is produced during the reaction. But besides that, you have 0 emission and you have an electric car.
You can be in the center of the city, no NOx, nothing. And you can have the driving range and the refueling time of an internal combustion engine because basically what you do is to transfer a fuel from a tank into another tank. So it fits very well when you need a lot of energy. And when are you needing a lot of energy? Long range, heavy vehicle, large vehicles, trucks come immediately to mind.
But it can also be used in cars and provide the kind of range, especially when you have very large cars, which are very difficult to electrify with batteries. Drawbacks always: costs, the platinum use. We need to reduce and this is something we are used to do, reduce the platinum utilization to by catalyst engineering. We do we manage to disperse the platinum to put very thin surfaces of platinum where you get a lot of activity, but with a very limited amount of platinum and this is a big cost driver obviously. And then economy of scale, this is not so much for us.
This is more for the automotive industry. A fuel cell car uses besides the catalyst and the membrane a lot of parts that are, let's say, known to the automotive industry, blowers, compressor, pipes, valves, the kind of things that if you produce in large amounts, you can basically reduce the price quite substantially. Maybe the biggest drawback is the need for infrastructure programs. You need hydrogen to be available where you need to refill. This is one of the beauty of the electric car is that the electrical network exists.
You are never very far away from a plug. And even if there is a need to develop more charging points, typically you need to go a few meters and then you get a power line and it does not cost that much. In case of hydrogen, you need either to transport it by pipeline, by trucks or produce it on-site. There will be a big investment needed. And this is a little bit of a chicken and egg problem is that until the infrastructure is there, people don't buy cars.
So this is something that can be managed. It will require a bit of government willingness to get there, But we really believe that it will serve a part of the need. So it's very coherent with our view that we have a number of technologies, and each technology will find its sweet spot. And you will have internal combustion engine, gasoline and diesel. You will have battery vehicles and plug in vehicles.
You will have fuel cell vehicles, and they will all find their way in the spectrum. Okay. I'm coming to the end of my talk with a wrap up and basically using the this picture, will sum it all. We are in internal combustion engine with our catalyst technology. We are in plug in in hybrid vehicle and plug in hybrid vehicle with our catalyst technology and with our battery technology.
We are in electric cars with our battery technology and in fuel cell with our catalyst technology. So it's all about technology. The future of clean mobility is within reach. It's all based on materials, and it's all based on technology. And this is our job.
This is to provide the technology to our customers. Thank you for your attention.
Thank you, Denis. So we have our Q and A session. So Mark and Kurt, can you also join on stage again so you can now raise all the questions that you still had for Kurt and obviously also for Denis.
Hi, afternoon. It's Alex from Barclays. You mentioned in the presentation before launch that in 2015, you gave some estimates for the total storage capacity for the transport markets that were out by a factor of 3 or 4 compared to your latest estimate.
Could you
just run through the 2 or 3 things you think you got wrong in 2015? And indeed, the rest of the world got wrong in 2015 compared to the way that it's materialized?
I think the main thing we all got wrong is the fact that there was a strategic uptake of the car OEMs to go into electrification. Most models started from the base assumption that we had to look at, let's say, economic parity. There should be no financial penalty of going to electrification. And this is now clearly changing. Secondly, let's not forget that the push in China to go faster to electrification is really very significant.
This is almost half of total market.
And there is an additional factor, that's diesel again. Please bear in mind that when we spoke in 2015, diesel in Europe was accounting for 50% of new car sales. And today, I think it's down to I don't know how much, less than 40% and still going down. So you cannot easily achieve or you cannot achieve the same CO2 targets with such a reduction in the diesel sales in the mix. That requires then to be compensated by more electrified vehicles.
So that's having a big impact on the assumptions European region and explains part of the acceleration. And that has started to take place after the 2015 presentation. I'd like to add maybe to the first point that you raised, Kurt, that clearly what you see today is what you see is that a number of car OEMs have today moved from a defensive position, which is environmental regulations are constrained, environmental regulations are a cost, come at a cost, and we need to push back. So a number of them have moved away from that to looking at where are the opportunities that are being supported by environmental regulations. And those players that have moved from the defensive position to the opportunistic view have embraced have truly embraced the opportunistic view.
Those players are actually accelerating the electrification, the move to electrification in a certain number of cases regardless of the cost per kilowatt hour of the batteries.
Tom Regalsworth from Citi. So a follow on question again from earlier. LG Chem announced that it was going to deeper vertically integrate into cathode materials the other day. And given the complexities that you were talking about between the different levels of the chain of
who wants what and the criteria,
How do you think over the medium term consolidation will work? Is there a long term future to have separate cathode material manufacturers from battery manufacturers? Will those 2 have to consolidate? Thank you. So actually, to have a single phase of the OEM, Thank you.
So actually to clarify the context, a number of battery manufacturers have produced cathode materials and certain other materials, some of them separators, anodes, etcetera, for more than 20 years. And that's been part of their strategy from the onset to master the technological content and especially the materials content. And we presented today why materials were bringing so many properties and functionalities and how they were bringing these properties and functionalities to the battery. And if you want, as a battery cell maker, to optimize the interaction between the different components, you'd better understand how these materials are being made and how they work and how you can tune them to optimize the performance and the interactions. So it's been their strategy.
You have a number of them, some of the Korean battery makers, some other battery makers have decided to go down that path from the onset. However, the limiting factor in that type of strategy is that eventually what they want is the best technologies. They want the best materials. And so you don't see anywhere a battery cell maker willing to go for 100% captive materials production because that means that you cut yourself as a battery maker from 3rd party developments from other technologies that may be better than your in house developments. And so you don't see that.
Typically, they keep a balance with a minority of captive production and a majority of third party sourcing in order to have access to the best technologies, whoever makes them. So we don't see this type of vertical integration going much further than that.
Ran Alfaore, Redburner. Just could you please elaborate on the anode technology you have in qualification? The time frame for that, is that is it pure silicon or is it doped graphite? Do you need new capital investment for production? How would the economics vary versus cathodes?
Thank you.
I mean on the we are in qualification stage, which means that we are already at the pilot and preproduction stage because you cannot qualify something that you are not able to produce in larger quantities, but this is only the very beginning. And we will first go to applications which where the battery maker can test the technology before going into something bigger. So in terms of adoption in electric vehicle, we are certainly talking about 5 to 10 years horizon. So it's not for tomorrow. It's not trivial again to use these technologies.
And for the intermediate use in other applications like portables, you're talking probably of a time frame of 3 to 5 years for market adoption. And then only if the cell manufacturers are satisfied with the, I would say, the performance and the durability, they will move to the next stage, which is testing for automotive applications. I'll add to the to be complete on the capital requirements. They are not so big. I mean, they are not comparable.
They are not of the same magnitude of what we have for cathode materials. And in terms of technology, what we are what we have developed and are producing are composite materials. So it's not pure silicon, it's composite materials. Pure silicon comes at too many drawbacks, as Denis indicated earlier, in terms of managing the swelling of the electrode, and that is not something that could be overcome.
It's Adam from Liberum. I had some questions on the limitations of high nickel. So it's a 3 part of it. It relates to the same theme. So first of all, Denny, you talked about the fact that the gas creation factor is a limiting issue in terms of the packaging that can be used for high nickel, rigid formats is what you said was required, rigid small formats.
In the portable electronic area for high energy, LCO prevails because of the inability of high nickel to be used in a thin polymer structure. You talked about the fact that you found a solution to the swelling issue, you could limit it to 20%. Do you envision a scenario longer term where high nickel could displace high cobalt in portable electronics at the high energy stage? So that's the first thing. And then just on the large formats, high nickel, I wondered if you could just talk about, as you sit, what the limitations are for a cobalt free large format battery?
I mean in terms of technology, this is definitely going in the right direction if we are able to but we are not suppressing. We are reducing the bulging. So there is still some work to be done. But indeed, this opens new perspective. But I will need to turn to Kurt to see what is the market position on that because cobalt has been entrenched in portable electronics for quite some time because of the specific requirements of portable electronics.
So it's not going to be an easy path to displace, but who knows, maybe a few percent of the application, some application can be switched from cobalt, and this will ease a little bit the pressure on cobalt.
So Adam, the requirements on Swelling for Portable Electronics are, at this moment in time, extremely harsh. I remember a discussion I had during a spec discussion with 1 of the bigger OEMs, and they were debating amongst themselves about the criticality of the thickness of the paint when they put the unique identification number on the cell. So I mean that was for them critical. So you can imagine that any small swelling issue in a cell is really deadly for a smartphone at this moment in time.
I think you can visualize that. In a car, you can make a pack that could be a little bit against the volume. When you have a cell phone, it's really an ongoing. Now on the large format question the large format question towards 0 cobalt, I mean, I would need to turn to the material scientists there, but really making a product with 0 cobalt is extremely difficult because cobalt is the bad behavior of nickel at least cobalt helps to stabilize the bad behavior of nickel. And if you go to 0, then you are left with no support at all.
And it's I believe it's close to unrealistic to go to 0.
Maybe if I can add a small clarification. The product can be made. It's extremely difficult to be used. So I don't want to give the impression that it's much more difficult to make than very high nickel. It is quasi impossible to use for a battery maker.
Chetan Udeshi, JPMorgan. Question on do you have any visibility on your competitors are doing? Because you guys are talking about difficulty in reducing or getting to 0 cobalt batteries in practical use cases. But just few days ago, Panasonic was talking about reducing the use of cobalt to almost 0 in near future. So is there a risk that somebody is sort of going ahead of Umicore in the next generation platforms?
Or how do you sort of track it in terms of if there is a way? And second question was more on the Catalyst side of things, where it was mentioned in the morning presentation that the number of platforms that will be developed in the future might go down as OEMs try to reduce cost. Wouldn't that raise the competitive environment in the industry in general that you guys have maybe 30% less platforms to win. And so essentially everybody is trying to will be more aggressive in getting that limited number of platforms. Would
you take the first one? If I would not be knowing what my competitors are doing, then my team is doing a lousy job. So of course, we have an indication. And I mean, we are one of the contenders for business. We are 1 company in the race for product development.
All I know is that what happens in the meeting room and in the lab is not always publicly shared and vice versa. So I would say development mainstream goes for most companies in the same direction, but that doesn't mean that we all do exactly the same at the same speed.
Maybe I should clarify a little bit my comments on the help that cobalt brings to keep nickel tinned. Definitely, you can standardize products without any traces of cobalt. It's going to be difficult. It's going to be costly. It's going to be difficult to use.
And at some point in time, you may wonder, okay, why am I going the last mile to just for the for bragging that I have put all cobalt out of the battery. It can be done. Does it make sense? I'm not sure. But reducing cobalt, going for iron nickel, this makes sense definitely.
Yes. Please bear in mind what Denis presented, and this is science. It's not numbers that we have estimated. This is the laws of science. Going from 111% to 90% nickel gives you a 17 percent gain in energy density.
The step from 80% to 90% nickel is a few percentage points in terms of energy density and a lot of drawbacks that you have to make up for because you cannot just say, I'll take the drawbacks. No, you can't. You have to make up for the drawbacks by adding components, adding equipment to control the performance and the durability of the battery by doping some of the components, etcetera. So you're adding costs. And at certain point in time, you move, as Kurt mentioned this morning with the heat map, you move completely out of the sweet spot from a cost point of view.
So you defeat the purpose. And so there is a balance to be found between the difference the different, I would say, performance requirements that a battery has. And this doesn't mean necessarily that you will go for the last bit of elimination of cobalt. There are many other levers that can be utilized, as was shown, on the packing density, on the anode in the future by going solid, etcetera, to increase the energy there was a question about the catalyst platforms. There was a question about the catalyst platforms.
So I'll take the liberty of answering that question on behalf of Pascal. And then I will see from Pascal's body language whether I have done a good job. The platforms are getting larger and fewer indeed, which means that there is a lot of homework to be done on the technology side to win these platforms because as was indicated this morning, the platforms are not one with great technologies. They are being one with the best technology only. So there is a lot at stake.
And what you see actually as a result of that is not more price pressure, more competitive pressure on the pricing side because that doesn't help because only the best technology wins. So what you see is more efforts being put on the technology development side and the joint development work with the customers to make sure you can come up with the best technologies.
Thank
you. Mutt Lugan again, ABN AMRO. A question on your CapEx versus capacity ratio. I think that was broadly stable when you did the various announcements. And I think you've said it yourself a few times that it's a competitive advantage where you stand versus competition.
Just wondering how you see that developing in the next, let's say, a few years, where it could go theoretically? If you can spend some words on that, that would be nice. And then secondly, with these larger platforms, does it also mean that you have higher synergies between Catalysis and RBM because you might be sharing information back and forth between the various teams?
So in terms of CapEx density, of course, this is for us something of prime importance, I would say. We make big steps forward. At this moment in time, like I mentioned before, speed and standardization is of strategic importance. And currently, I would prefer a stable line and maybe a slightly higher investment than continuous change because that's uncontrollable. This being said, the industry is going to grow to that magnitude that we have to improve.
And there are significant ideas in the pipeline. So I do see us improving over time, yes.
And this
is no coincidence that we are opening a new process competence center. This is one of the goal is actually to find processes that are less CapEx intensive and less OpEx intensive than the existing processes.
Yes. We have a competitive advantage. We have strength, a clear strength in process now how for cathode materials, and we want to leverage that, and we want to make this strength even stronger and increase the process gap with our competitors clearly. And that will have an impact on both the CapEx density in the long run as well as our operating expenses. So that's these are the goals that we are pursuing through these process development programs.
On the synergies between Catalysis and RBM, what you described is the ideal state that we have in mind. It is not reality yet. So yes, I would expect that in a number of years, and I cannot tell you how many years it will take to get there. There will be more synergies in as far as the interface is concerned with the customers between the catalysis side and the battery materials side.
Jeff Harre from UBS. Just a quick question. You said on your bridge of increasing energy density that the silicon anode gives somewhere between a 10% to 50 percent uplift energy density. Why such a wide percentage? Could you give some more detail on what drives that?
Yes. The 50% is what is achievable with the composite that would be used as such. But normally, customer would blend the composite with existing graphite. So depending on the blending they do, they can go anywhere from 10% increase up to the 50% increase. Maybe there is more potential for the future, but we believe that this range is manageable, but it will take time and they will probably go to 10% first and then to 20%, 30%, 40% before going into 50%.
That's why the range is so
large. So the reasons the customers are doing that is to manage the risks. And so they work by smaller increments than what is theoretically possible. And that's why some of these new technology introductions take 10 plus years, as was mentioned earlier in the day.
And the last reason is to keep it compatible with what they have as production technologies. So a cell maker does not want to change its mixers, its coating lines because they start to use a couple of percentage silicon. That's really critical.
Mark Newman from Bernstein. Appreciate all the presentations here. They're very helpful. What would be very interesting for me to learn a little bit more about is in the move to the higher nickel content, Cathos, you've talked quite a bit about today, Appreciate a lot of the drawbacks in high nickel content and some of the pros and cons. But what is really the main hindrance in moving to NMC like a high nickel content earlier?
What is the main hindrance? And can you talk about what Umicoy is doing to overcome those things? Is it some more refined is it particle size? Is it the you talked about the packing and particle sizes earlier. Is it something around that?
Is it something around dopants? Is it around coatings? Is it something like that you haven't really talked about much today? And I guess the reason I'm asking that is not just to get an idea about adoption, it's to try to get an idea on is Umicore going to be is Umicore going to maintain its lead on high nickel content that it has today? We know that Umicore has great technology for today's NMC due to its process technology advantage.
Is that going to be, in your opinion, more for the future chemistry or less or similar in terms of Umicore's lead? And then second question, if I may, a shorter one. Some of the next next generation chemistries that you talked about, such as solid state and silicon anodes. Is Umicore going to be involved in any of those chemicals? Not talking about fuel cells, I'm talking about some of the electrolytes you mentioned, some of the things there?
Or are you just talking about collaborating with other partners? Thanks.
I will go for the first one, yes. First of all, I would like to say I would like to correct a statement you make. You say a move to higher nickel. I'm not talking about a move to higher nickel. We should talk about the increased use of higher nickel cathode materials.
The hindering step today is the application. We don't meet today I mean, we the industry does not meet all the customer requirements at battery level or at pack level with high nickel components. This is a fact. It's not because company A or B at the material level is more or less advanced in making these products. It's the application.
I mean, I'm happy to invite you tomorrow. I will ask my collaborators. I will show you physically what it means to integrate a high nickel component in a polymer cell. We can together have a look at it and then you can judge yourself. But it has nothing to do with us being more or less advanced.
I mean, honestly, as a material maker, I don't care whether people want to use NMC 111, 532, 811, 9XX, I don't care. We have the base set of capabilities to develop that, to scale it up. We have the assets and it's being made today. I want to be very clear about that. Umicore is selling, producing a different set of NMC products today.
And whether that's now 10% of that or 20% of that, honestly, again, we don't really care. We are agnostic to that. The most important thing is that the customers know that whatever they need at that moment in time that they find somebody who has the capabilities to react fast, who's there with big volumes and who's reliable. That's the key element today. And I think we are unique in that respect.
There are very little companies in the world who can offer this.
On the solid state battery, I mean this is a technology move that is upcoming. So the first thing you do when we are faced with a new technology coming in is that you figure out what it does really mean. And we start from the product we know well. The solid state battery will require cathode materials. We are specializing cathode materials, so let's try to make cathode materials that are compatible with the solid electrolyte.
So this is always our entry point. Now when you start to understand what a solid electrolyte is, you might get ideas and say, okay, maybe I should partner with that company, maybe I have some ideas to make it better, maybe I can contribute to that, but this is way too early to say. At this point in time, we focus on the cathode. Cathode is what we make and cathode will be used in solid state batteries. More with affinities,
but today, Catherine? Well, this being said, if the difference between solid state and liquid state is that the liquid electrolytes in the current generation of battery technologies is organic material. And we don't have competencies in organic chemistry that would, I would say, push us or convince us that this is something that Umicore this is an effort that Umicore should do and develop these competencies to try to compete there. When you move to solid state, it's a new game. And there may be a move away from organic to inorganic materials.
And then this is our territory. So I would put it in a broader sense than just cathodes. With the move to solid state, the game is open again. And cathodes is a known thing for us, and the rest is a possibility. So that's the difference between the liquid state where clearly our focus should be on cathode and anodes because the rest is organic, and we're not qualified to or not competitive to play there.
In solid state, there are more possibilities. It's a door opener.
It's Scott McClellan from Schroders. I have two questions. First was on customer concentration for your battery materials, Not in terms of the OEMs, I'm assuming you have a diverse range of OEMs. You're selling to it's more of the cell OEMs and whether or not you feel more aligned to one particular cell OEM or whether you're happy with the current diversification of customers that you have at that level? And then the second question was around investments and cash flow.
We spent the whole day talking about the exciting opportunities that you have, but haven't really spent a lot of time talking about how much it's going to cost you to get there. So can you give us any numbers or any indication on a CapEx R and D side to help us understand the funding of this growth in each of the individual areas, if possible? Thank you.
Let me start with the second one. Clearly, we're going to continue to invest significant amounts of money to grow this business at a very fast pace and faster than anyone else out there in the industry. And we have, I would say, a strong balance sheet that allows us to do that. Plus, we have a fairly or fairly a very strong cash flow profile from the other two segments, from the Catalysis and the Recycling businesses, that allows us to sustain that investment effort and that kind of investment intensity. So more guidance on the CapEx in the longer run than we have given so far is not on the agenda for today.
And because we still have some homework to do on what's beyond 2021, what we announced earlier this year, the EUR 660,000,000 investment program will bring us to the capacity that we need in 2021. Clearly, our growth doesn't stop there. So there is homework being done in order to figure out what's coming next in order to move us then to 2023, 2025 and beyond that, including then the impact on some process developments that are currently in the pipeline. So it's too early to say that, too early to be to quantify that, sorry. And suffice to say, at this point in time, that we will sustain the investment efforts because the rewards are definitely justifying that.
Do you want to address the customer concentration or lack thereof?
Of course, of course. Indeed, so far, customers have been concentrated in Asia. Umicore has actually run the last 20 years always a multiproduct, a multi application and a multicustomer strategy. In the beginning, that was rather exceptional in the Asian business where there were a lot of 1 to 1 business relationships. Thanks to this strategy or the strategy has brought us where we are today.
This being said, I mean, as heading a business, you can or you should always be happy if your team brings additional customers. So of course, these are welcome. At this moment in time, we clearly see from our customer basis, we have a strong shift towards Europe. It's not a coincidence that also our next investment is going to be in Europe. So the geographical expansion is for me actually more critical than adding an additional customer to the list.
But every customer and all the business is, of course, valued.
If I may add to that is yes, we are happy with the level of customer diversification and platform diversification we have in the portfolio, satisfied enough to give us comfort about our investment programs. What I would not want to have to do is to decide an investment for 1 customer or for 1 platform, even if it's a very large platform. So I'm happy we don't have to do that.
Charlie Webb from Morgan Stanley. Just maybe one point of qualification or clarification on your qualification processes. Given your wide range of product offerings and the competencies you have in battery materials, are you currently going through the qualification process for high energy or high nickel based materials with your customers? Is that on the agenda and the qualification process out to 2021? Is that happening right now?
And then secondly, just on the IP backdrop, you've obviously bought and acquired a number of licenses over the years. How do you see those licenses moving forward? I mean, do they I think believe they start to roll off 2021 through 2024. Are there certain materials within the NMC family that aren't captured in those licenses? Or does that cover the whole spectrum?
I guess, just trying to understand your protection from a kind of license standpoint, given you've made decisions to acquire them over the last couple of years.
Let me start with the first question on the qualification programs. At this moment in time, we are running qualification programs covering all products. And this may sound as a surprise to you, but even today, we run qualification programs for a product that everybody believes is already gone, NMC 111. We are there are still platforms open with SOP 2021, 2022, where NMC111 is seen as a valid candidate. And 2 years ago, we already started qualifying platforms with really high nickel products.
So the qualification program, the evolution of chemistries, this is a continuum. I mean, this is not something that goes into steps. It depends on what type of platform you're qualifying for. It depends on the customer OEM strategy and it depends on the readiness of the product for the application. That drives it.
I think, Kurt, the heat maps that you presented this morning for the 4 applications, BEV long range, BEV mid range, PHEV and buses, is a good guide to what is currently in the qualification pipeline. So it covers the whole range but depends on the application.
It may also happen that customer change mind during qualification, wanted to go for a given nickel rate and then change either down or up during qualification phase, depending on their requirement and platform requirement?
It's actually standard practice nowadays. For the bigger platforms, there is usually 2 or 3 tracks going in parallel, making to the very last stage of decisions for technology choice of a platform. Then the second question on the IP. A bit similar to qualification being a continuum, you have the same on IP. I mean, there is at this moment in time for NMC really very little patents that are called base patents.
And some of these we now own. So apart from that, most of the patenting activity is more improvement patents, really specific patenting specific performances of products. NMC materials are now long enough available and on the market that it's impossible to steal patent compositions. So some of the patents indeed end their lifetime beginning of 2020s. But on the other hand, they will be somehow replaced or our products will be covered or are covered by most of our own IP that we have been generating the last 8 to 10 years.
So I'm pretty confident I'm really highly confident that the products we bring to the market are covered with Umicore IP at this moment in time, now and going forward.
Even better covered because I would say you can cover with IP the basic chemical composition. It is known. I mean, the kind of very specific IP protection that we have now, as Kurt described the improvement IP is much finer and much more complicated for anyone to reproduce. So it's higher quality even I would even call it a higher quality IP.
Thank you. A question about the battery management system and cooling systems. I think the rate of degradation in the Tesla batteries shows how integral those components can be in managing the battery life versus with that particularly unstable chemistry they use when compared to some of the batteries that use higher cobalt content, such as like the Nissan LEAF, for instance. I just wonder, whilst you're spending all this time and effort working on improving the stability of these high nickel chemistries. From a material perspective, a competitor of yours might team up with a bathroom management system provider, a cooling system provider and realize actually the material only needs to be so good if you have the appropriate management systems around it?
Is there a risk there? Do you work with these providers?
Improving battery technology is nowadays always a collaborative effort. Times that one material maker being that cathode or anode really can do something on their own and make a big step forward on the on improving the battery, these are over. If we talk about stability, degradation of electrolytes and leading to indeed reduction of the performance over time, we always talk about the chemical reaction, the chemical interface between cathode and electrolyte. And as Denis mentioned, you have you should see that as a pretty aggressive nickel atom or ion actually, who wants to eat in the structure of the organics. This is a chemical process, and every chemical process can be speed up with temperature.
You cannot stop that. Also that's a continuum, but this is one important thing I would like to add. This is a logarithmic relationship. So increasing temperature is dramatically speeding up these chemical reactions. And they are parasitic reactions, so we really don't want them.
What people now really the approach now are most system integrators are approaching is to really keep temperature stable. This is something we can handle. We can feed them with the base data how materials are going to react at these temperatures within given within 5 or 10 degrees, And then they can model how the systems will really survive after 8 or 10 years. Like I said, it's a system effort. Are there other companies looking into collaboration with people who supply cooling system?
Maybe yes, maybe no. I have the feeling that at this moment in time, really system integration is only handled by the car OEMs themselves.
If I may add, what we don't see is, I would say, the concept that if you can make up for a certain drawback by the management system or whatever, that you would settle for a lower quality product. Because every time there is a quality level that is reached, that is taken for granted by the customer basis, and you have to build on that. You cannot just decide to make it to arrive at the same level of performance differently is not good enough.
And don't forget that people look for more energy. And so if you can manage your system better by managing the temperature, you would rather use that to use a more energetic product and get less weight, less volume in your car than just settle for something of less quality.
Wim Hoste, KBC Securities again. I have a question on the competitive environment. We know from the CapEx amounts, etcetera, you shared that you are outpacing the industry growth, but could you maybe elaborate a little bit on the competition? Do you see new players emerging that are gaining credibility with the OEMs? Or is it kind of a fairly limited amount of competitors you're facing?
As I have mentioned on previous occasions, for the time being in the Automotive Application segment. It's a game of a handful of players that are qualified and that are growing at different pace, but growing, I would say, simultaneously. So it's a limited number of players, Asian players, Japanese players, Chinese players, some smaller Korean players. And please bear in mind, as I indicated earlier, that some of the battery cell makers have captive production too, which is not directly competing because they use it for in house purposes only. So they don't put it on the market.
But that also is part of the growth. So the I would say the landscape is not has not fundamentally changed over the past 3 or 4 years. It's still a handful of players that are qualified today. And again, like in previous communications, I'm not meaning or pretending that there will not be newcomers to the segment. The only thing that you have to bear in mind is that as the acceleration is taking place now, it's getting somewhat more difficult for new entrants to step into this demanding segment.
Hello, again. Again, I really appreciate really an enlightening presentation. I was just curious if we could kind of take a little sideways step and looking towards 25%. We did this with Catalysis, and I think it would be helpful for us if we touched on it here, just on kind of metrics of growth and margins. The margins have grown a lot here.
And what kind of a trajectory should we have in our minds in the medium term for that? And also kind of on the growth side, I know there's a lot of growth in one of the charts. There's a huge amount of growth in gigawatt hours. What kind of growth kind of numbers are you looking at in the medium term? Could you just help us with those?
Thanks.
[SPEAKER JEAN FRANCOIS VAN BOXMEER:] So it's a little bit premature, I have to say, to start talking about metrics beyond financial metrics beyond 2020. As I mentioned, we have a capacity plan in place that brings us to 2021, and the homework started to figure out what's coming next. And as usual, that will be based on what we know because we have qualified for platforms that go beyond 2021. And so that will support the next phase. But it's too early to translate that into metrics.
I would like to say that the only thing that I would like to say today is that there is no way we're going to reduce our ambitions beyond 2020 or 2021, and we will seek to grow at least as fast as the market between 2020, 2021 2025. Indeed, based on technology, based on innovation and based on the competitiveness of our processes. And more, I would say, meat and more metrics to quantify that, you have to bear with us. We'll take 2 or 3 more questions. So possibly from people who have not yet had a chance to raise questions.
Thank you. If you look across the qualification programs that you have right now and the work that you're doing with your customers, do you see any meaningful difference in, I guess, the technology road map for the Chinese complex versus the rest of the world in terms of composition, in terms of the animal materials and some of the features that then you mentioned just now?
I do not really see significant differences regionally. What I do see is capability differences at cell makers or even at car OEMs to integrate different type of cells into a workable system. Some of these companies have 20, 25 years experience in lithium ion. And I mean, you can feel that. And the quality of the interactions with some teams are just deeper or of a higher quality, and these teams typically better understand things beyond pure cell design, pure cell chemistry.
I think this is an important measure for us to understand what kind of relationship development, relationship we can have with them. So some nuances, yes, but dramatic differences, I would say so. I mean, again, playing in automotive, then you are already at a high level of quality.
If I can add to that, the innovation road map that Denis has just shown with the different avenues to increase energy density, including the composition, including the packing density, including the anode materials, including the solid state, etcetera. That is a Umicore road map, and that is very much aligned with the industry road maps as well. And you see that across the industry, across regions. And so we are working on the same themes as our customers and the car OEMs indeed, including up to the solid state batteries. And there you don't see major regional differences.
This is basically the industry roadmap.
Final question.
It's your privilege, Jan, to raise the last question.
Thank you. Jan Lager for Franklin Templeton. I wanted to follow-up on the cash flow question. So there's an indication of EUR 660,000,000 by 2021 in CapEx that's relatively fixed now. The working capital part of it, I think the indication is about half of that is so let's say €1,000,000,000 in total capital.
If I recall my recycling days from years back, there was significant amount of variability of working capital depending on what's happening on the revenue side. How variable is working capital within this segment? And if it is variable, how sure are you of sustaining that 15% ROCE in this segment?
So there is a degree of variability, and that is mostly related to metal price, to fluctuations in metal prices. And the reality is that if we have higher metal prices, we have higher working capital requirements, not in the recycling business where, as you will recall, we work with negative working capital. But in the Energy segment, Energy and Surface Technologies segment, we have a more conventional situation where indeed, where metal prices go up, we have more working capital requirements. From a profitability point of view, we make up for that through the recycling margins indeed. So for Umicore, it is not necessarily affecting the profitability in terms as we measure it in ROCE terms.
Okay. Thank you. Mark, you can start now with your
closing remarks.
Yes. We'll have a chance, I mean, at least for those attending physically the presentation. So today, we'll have a chance to continue informal discussions and to address some of your follow on questions later today. So that was quite a bit of substance for the day, I bet, and lots of information to digest. And again, for those attending here in Seoul, there will be a chance to follow-up with your additional questions informally.
Before we do that though, I would like to wrap up the day and the presentation part of the day and offer some perspective and concluding remarks. And in order to do so, I will reuse a slide from the 2015 Capital Markets Day. And so once more, we will reuse the slide. I will reuse the slide, And it is not out of laziness, so like in the case of Kurt. It's simply because this slide is still very much relevant to show how or to visualize our unique position in clean mobility.
Unique position in the sense that Umicore, as I mentioned in my introductory remarks as well, is the only company that offers the full spectrum of materials technologies to address the technology needs of cleaner mobility. And the only company that, in addition to that, is offering a closed loop model with recycling capabilities to deal with end of life materials coming from these more sophisticated and cleaner drivetrains. It doesn't mean we don't have competition. That's not what we mean by being unique or uniquely positioned. We do have competition.
In Automotive Catalysts, clearly, we have well established and strong competitors in the segment. We discussed about some of the competitive positions and some of the technology developments in that segment. Clearly, we have well established competitors in that segment. And some of them do aspire to become also competitors, do aspire to play in the EV space or in the cathode material space. And I would say that today, their focus from a practical point of view is still very much on catalysts, while they are at a relatively early stage in terms of development in cathode materials or in other applications like fuel cells.
We also have competition in battery materials. We have just touched on that. It's not changed a lot over the past years, but we have strong and well established competitors with a long standing experience in cathode materials, for many of them originating like Umicore from the Portable Electronics segment and having developed over the past 10, 15 or 20 years significant product and process competencies from the electronics industry moving then into qualification for automotive side. So well established competitive landscape as well. And with one exception, I would say, all cathode materials competitors in the battery materials space are really focused on cathode materials.
The one exception I have in mind is a well known Japanese company that is also very active in recycling and has also, to a certain extent, very significant closed loop capabilities for some of the battery materials. In the fuel cell space, we also have well established competitors, less than a handful of them, so 2, 3 good and strong competitors with significant, like in the case of Umicore, development programs to bring very good electrocatalysts to the market. And one of them being a precious metals company specialized in precious metals with no other activities than fuel cells addressing the clean mobility requirements and another one being a company with a broader, I would say, spectrum of offering. So again, I'm using this slide to show that the positioning of Umicore is pretty much the same. Our assessment of the positioning is the same as it was 3 years ago when we launched the Horizon 2020 strategy, a unique positioning, which doesn't mean that we don't have competitors, but unique in the sense that we are the only player that has the full spectrum of materials technology offering to support the drive to cleaner mobility in the Automotive segment.
Why does it matter to have this broad offering and to cover, I would say, all technology developments, all technology avenues in terms of cleaner drivetrains. It matters because when we spoke 3 years ago, we told you that I told you that there was quite a lot of uncertainty about the future engine mix. It was difficult 3 years ago to figure out or to make out what the future engine mix or the future drivetrain mix, I should say, would be. It is still the case today. The engine mix has changed quite a lot since 2015, but it's still difficult to make out what it's going to be in the future.
We have an idea of the trend, but nobody knows today what precisely it will be and in which precise proportions. And that's why it really makes a difference in being able to offer the full spectrum of technologies. Now also recall having you a number of having told you a number of years ago when we started to implement that concept of strategic concept of covering all the bases from a technology point of view, I remember having used the adjective agnostic. And having said that, the rationale, the strategic rationale behind this concept was to make Umicore agnostic to the consumers' choice, indeed, because we didn't know where the engine mix would go because that depends on consumers' choice eventually. It is still the case today.
We still don't know and we still want to be sure that whatever the consumers choose, we have the technology to support our customers. I have to qualify that statement though in the sense that we're not agnostic in terms of value. There are certain drivetrains. There are certain technologies that bring that create more value for Umicore than others. And I think this is important for you to appreciate so that you can also understand where our focus is in terms of investment and in terms of development.
The way I'm going to explain the difference in terms of what is creating most value to Umicore is by using a combination of factors, and I've tried to aggregate 3 factors. 1 is the revenue potential per car for market share. And it's the market share. And it's the combination of these three factors that I have used to characterize or what we prefer in terms of value creation. Clearly, what comes out first from that exercise is that what creates most value for Umicore is full electric long range vehicles.
Next to that or following that, 2nd in order of preference in terms of value creation is a little bit of the same. That's the midrange full electric vehicle drivetrains. Following that would be the plug in hybrids. We discussed earlier the potential of plug in hybrid from a catalyst point of view combined with the battery materials. I would say this brings a fairly compelling this creates a fairly compelling equation.
And this is, in terms of value creation, only second to the full electric drivetrains. Following that will be fuel cells. Typically, fuel cells are working in combination with a small battery. So that is helping also the value proposition for Umicore. And this is one of the very compelling drivetrain developments for the company.
Next in terms of value preference will be the gasoline configurations with gasoline particulate filters. And only after that would come the diesel engines, the clean diesel engines, cleaner diesel engines, Euro 6D, for instance. Again, just to make sure this doesn't get misinterpreted, it doesn't mean that the revenue per car is lower for a diesel Euro 6d than for a gasoline car with a particulate filter. This presentation, this order of preference takes into account our technology positions and our market shares as well. And last, in the order of preference, would be the gasoline configurations without the particulate filter.
So this is, I think, important and an important qualifier to the earlier statements about being agnostic to the consumer's choice. Again, it is agnostic in terms of we cover all the bases. It's not in terms of value creation. In terms of value creation potential, this is the order or the sequence or the order of preference that clearly plays out most in our favor. And that is why it is so important for Umicore and also because we are we don't know where the precise engine mix is going to be in the future and because we know that there will be a coexistence of different drivetrains, this is why it is important for us to have the versatility and the breadth that I have mentioned before and that my colleagues have presented in more detail during the day.
I've been asked several times over the past few years whether the Catalysts business was close to the tipping point or how close it was to the tipping point, whether it was making sense to continue to invest in Catalysis. And clearly, I hope that we have convinced you during today's presentations that there is way more value to be captured from the Catalysts business in the next 10 years and that it is not a story of catalysis, of having to make a choice between catalysis or battery materials today. What we want to do is continue to pursue both, continue to develop and grow both because there is a lot of growth potential in both and not just in the electrified draught streams, not just in the battery materials part of the business. In both cases, there is significant growth ahead of us. In both cases, it is driven by a combination of innovative technologies and tighter environmental regulations.
So this is an analogy that will continue to drive the 2 businesses. The other analogy is that in both cases, the growth is predominantly in China and Europe. China and Europe are the leading forces from a geographical point of view to cleaner mobility, and that is clearly translated in the market potential and in the value creation potential for Umicore in clean mobility materials. In both cases, this is another analogy, there is a lot of technology and a lot of innovation that is required and that there is a diversity of technologies that are required in order to meet the variety of customer requirements and consumers' requirements in terms of performance, quality and durability. And last but not least, I would like again to repeat that I'm fairly convinced, I'm really convinced and I'm confident that Umicore is uniquely positioned to thrive in both areas simultaneously.
And that's the key message I would like you the key messages I would like you I hope you will take away. I cannot impose you to take those away, but that's if there are key messages that I would love you to take away from today, these are the ones that you see on the slide now. Now talking about growth. I would like to close my presentation with one slide that show that there is one area in which the growth in our business is being matched, and that's the growth in your interest in the company. And I will go back 6 years to the Capital Markets Day that we had in Korea here in Seoul in 2012.
We had 20 people attending, both sell side and buy side. And that's not including the Umicore team, I guess, Evelyn? No? Okay. And today for the Capital Markets Day and tomorrow for the site visits, we have 70 of you.
And I would like to thank you very much for having joined the event today here in Seoul. And it is really rewarding for the Umicore team to see that increased level of interest from your side. Time has come now to say goodbye and thank the audience that is watching us on the web. And so thank you. And of course, if you have follow on questions, you can address them to our Investor Relations team.
And so the webcast is thereby closing. Before we finish, and I would like to say one more thing as I assume that you understand that this event has required quite a lot of preparation. And so I would be really happy if you would join me in thanking the Umicore team that has prepared this event. And before you go for the applause, specifically, I would like to all of us to thank my fellow presenters, Pascal, Kurt Pascal, Kurt and Denis. I would like to thank Evelyn, our master of ceremony for the day and our Head of Investor Relations, Eva, Evelyn's colleague in Investor Relations.
We also have Marie Olin and here in the front and Joon at the back of the room from our communications team and Hwa Yon from our Seoul office, who has actually made all the arrangements so that this event could take place today and tomorrow in Seoul. So for them, thank you, and please join me in thanking them. And I would also like to thank the NASDAQ team for the wonderful technical support for today's event.