UK’s chemicals and sustainable technologies company Johnson Matthey (JM) announced Thursday it will no longer pursue investments in the battery materials sector due to fierce competition, Kallanish reports.

The company has been trying to commercialise a range of high-nickel advanced cathode materials eyeing mostly the growth in the electric vehicles market. It planned to start mass production of the so-called eLNO materials in 2022, with proposed plants in Poland and Finland.

“While the testing of our eLNO battery materials with customers is going well, the marketplace is rapidly evolving with increasing commoditisation and lower returns. We have concluded that we will not achieve the returns necessary to justify further investment,” explains ceo Robert MacLeod.

JM says it sell all or parts of its Battery Materials business and exit the sector to focus on areas “more aligned” with its core capabilities. These are hydrogen technologies, circularity and decarbonisation of the chemicals value chain. The unit has net assets of £340 million ($455.7m) and employees 430 people, mostly in the UK.

The decision follows a detailed review ahead of reaching a number of critical investment milestones. After failing to strike strategic partnerships, the board concluded that JM’s capital intensity was too high compared with other more established large-scale, low-cost battery materials producers.

It’s unclear what will happen to the lithium and nickel supply agreements JM signed with SQM and Nornickel, respectively. The company didn’t immediately respond to Kallanish’s request for comments.  

Further details are expected on 24 November when the company will announce its first half results.

Jefferies has questioned JM’s ability to be a supplier to the automotive supply chain “of the future,” without battery materials. “While hydrogen and chemical decarb [decarbonisation] should grow, it is very hard to believe these can be sufficient revenue drivers and replace the very significant earnings from Clean Air [business segment],” the investment banking company says in a report.

The purchase price required is likely to be a fraction of the £340m net asset value, Jefferies adds, noting an incoming ceo would have a challenging task of “managing a business in decline.”