After that of semiconductors soon the shortage of batteries? The automotive industry is beginning to worry about a possibly even more devastating shortage, with a lack of raw materials leading to problems in the production of batteries for electric cars. Some, like Elon Musk, who is generally quite optimistic, fear this scenario.
As you are surely aware if you follow the automotive news diligently, and even the news in a broader sense, several industries are facing problems with the supply of semiconductors. These chips are now essential for the proper functioning of our cars, which are increasingly equipped with electronic systems. Delivery times are getting longer and some models are not available for several months, or even more than a year in some cases.
The pandemic and the Ukrainian conflict are the main causes of these shortages, and they could lead to still others, much more devastating according to some players in the automotive industry. Indeed, under pressure from the legislator, the car fleet is electrifying at a forced march and the need for lithium-ion traction batteries (and therefore raw materials) is intensifying. With the frenetic pace of electrification and the various health and geopolitical problems, some leaders and analysts are starting to sound the alarm about the risk that battery production will be unable to keep up with demand.
Top leaders are worried about the situation
Even the whimsical boss of Tesla, Elon Musk, warned of this delicate situation. The American brand aims to deliver more than a million models worldwide in 2022. But this objective could quickly be lowered by the shortage of components. In France, for example, you have to wait until early 2023 to be delivered of your Tesla Model 3 if it is ordered today. Last year, on Twitter, Elon Musk had already warned that a shortage of battery cells could hamper the group’s ability to increase production of its truck, the Tesla Semi.
Rivian boss RJ Scaringe is even more alarmist, as evidenced by his interview with the Wall Street Journal. The latter thinks that “Semiconductors are just a small appetizer to what awaits us with batteries over the next two decades”. He had also announced in the columns of CNBC that “Most countries in the world will stop selling thermal engine cars. The scale of this change is difficult to appreciate”thus suggesting uncertainty about the growth of the electric car in the short term.
According to a report by the European Energy Agency (IEA), sales of electric cars have already tripled worldwide between 2019 and 2021 to reach 6.6 million units. Even if this remains a drop in the bucket compared to the 78.837 million vehicles that were sold last year according to estimates by Inovev, the fact remains that sales growth is exponential.
Carlos Tavares, the boss of Stellantis, also warned of this situation. As part of the FT Future of the Car 2022 conference, he announced that he feared battery supply problems around 2025 and 2026. “And if there is no shortage of batteries, then there will be a significant dependence of the western world on Asia. It’s something we can easily anticipate.”he added. “The rate at which everyone is currently building battery production capacity may be at the limit of being able to support the fast-moving markets in which we operate”he specified.
The demand for raw materials is exploding
The demand for materials is exploding, especially those used in batteries. The recent war in Ukraine has revived fears, especially at the level of nickel, a metal of which Russia is the world’s third largest producer. At the beginning of March, its price had even doubled in the space of 24 hours. But nickel is not the only one concerned.
The price of lithium is also exploding and heading towards new record values. At the beginning of 2021, its price was around €5/kg, while it has now risen to around €30/kg. According to several analysts, it could even reach €50/kg at the beginning of 2023. This material is not at risk of shortage in the short and medium term, but its costs could lead to a significant increase in the price of electric cars.
For cobalt, a key element in the manufacture of the cathode of a lithium-ion battery, even if its use is decreasing, it alone is responsible for 25% of the cost of the entire battery. It is heading towards 35 dollars per pound, or 70 €/kg. Regarding graphite, used in particular to manufacture the anode of batteries and mainly supplied by China, the specialized information agency Benchmark Mineral Intelligence estimates that demand will increase by 18% on average each year until 2030 and that it may not be possible to keep up with this growth.
According to a study conducted by Roland Berger, there are four risk factors for the battery supply chain today. The first is geopolitics. Indeed, the extraction and processing of resources comes from a “small number of countries”, while about a tenth of the world’s nickel production originates in Russia. The exploitation of these raw materials has “significant environmental and social impact”. The extraction of lithium uses, for example, large quantities of water, not to mention the CO emissions2 for certain production processes.
At the same time, the increase in production capacities in the value chain “from mine to cell” must also be taken into account. The study indicates that “capital expenditure of 250 to 300 billion euros is planned over the next eight years” and “a third party must satisfy European demand”. Experts also believe that “the availability of certain materials will become critical”, citing expected shortages for nickel, cobalt or their sulfates, but more specifically lithium.
This context has led some actors to resort to other chemistries. Tesla has thus chosen to equip the entry-level versions of the Model 3 and Model X with lithium-iron-phosphate batteries, without cobalt or nickel. These accumulators also have other advantages: they accept a 100% recharge better and are also less expensive. On the other hand, they have a lower energy density and they have to take up more weight and space to obtain the same capacity as an NMA or NCA battery used in the other models of the brand.
The other technology that is making a lot of noise at the moment is the solid-state batteries promised for the end of the decade. These promise to be less greedy in rare metals, to heat less and to benefit from a better energy density. But they will not be available before 2030, unlike the semi-solid batteries which should arrive at the end of the year, in particular on the Nio ET5 and ET7.
To prevent future shortages, Wolfgang Bernhart, partner at Roland Berger, makes some proposals. According to him, “an integrated approach between metallurgy and chemistry will help reduce costs” at the production level. He adds that a “Increased regionalization and relocation of several stages of battery manufacturing can also mitigate geopolitical risks. Recycling will also play an increasingly important role from the end of the decade. »
Thus, some countries, like France, are considering building mines on their own soil, in order to avoid being dependent on the rest of the world while increasing production capacity at the global level. Regarding recycling, it is expected that in 2030, only 11% of the batteries produced will come from recycling. It will take longer before there are enough end-of-life batteries to be recycled and reused in new vehicles. On the subject, manufacturers are working hard to improve the recycling rate, like Volkswagen, which wants to recycle the same battery several times. This will reduce the need for materials for the design of new cars in the future.
All you have to do is wait for new mines to open all over the world in order to reduce the tension on the market for materials used in batteries. It is possible that prices will continue to rise, but the firms do not all have the same analysis, and some predict a drop in battery prices as early as next year.
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