The automotive sector is on red alert amid speculation that raw material shortages will impact the EV battery supply chain in 2022.
The lithium-ion batteries in electric vehicles use a combination of rare earth metals like neodymium, praseodymium, dysprosium, and common and uncommon minerals like cobalt and lithium in great quantities.
Bloomberg blew the whistle in July, predicting that raw material shortages for batteries will be the next big test after the semiconductor crisis.
Recent reports back this, with the global lithium shortage giving EV manufacturers pause for concern. Sky News reports the world needs four new lithium mines per year to make supply meet demand, but the pipeline doesn’t come close to meeting this requirement.
Some EV manufacturers are hoarding raw materials, and the world’s biggest electric car maker, Tesla, is moving away from cobalt to LFP chemistry because they consider cobalt to be the biggest supply chain risk for EV batteries.
Most electric vehicles have a lithium-ion battery pack because Li-ion has a high energy density for its weight and can charge and discharge at any state of charge. The technology is proven, and manufacturing Li-ion batteries is easy.
However, the growing demand for electric vehicles is fuelling demand for EV battery raw materials like lithium, cobalt, nickel, manganese and rare earth metals.
The mines in operation today are not sufficient to make supply meet demand one year from now, which is a cause of great concern in the automotive sector.
Additional factors could confound the problem:
Price volatility in raw materials (the price of rare earth metals has exploded, moving nearly 50% higher on average since March)
Battery composition changes (while lithium-ion is the top dog today, solid-state batteries use a lot more nickel and cobalt)
Trade tensions between countries (China controls 55% of global production and 85% refining output of rare earth metals).
Accurate forecasting is crucial to making supply meet demand. Manufacturers must anticipate fluctuations in the supply chain and make allowances for events.
For instance, no one can predict the next coronavirus pandemic, but a 25% drop in raw material mining output can be incorporated into forecasts.
Manufacturers might also like to look into alternative battery chemistries. As we mentioned before, Tesla is switching the chemistry of its long-range batteries to reduce dependency on cobalt. Other battery manufacturers can do the same to fortify their supply chains.
The downside to switching chemistries is it is only possible following extensive (and expensive) research and development. The world’s leading EV battery manufacturers won’t invest in this area without proof it will turn a profit.
EV battery recycling is another important future step. Swedish company Nothvolt made the world’s first fully recycled EV battery in November. Today, however, Li-ion battery recycling is not economical on an industrial scale.
Another option is limiting EV battery production, either in total volume or in cell volume (installing smaller batteries). With EV batteries becoming more efficient, smaller capacities might not be detrimental to range in the future.
