• EV Battery Shortage Could Be Worse Than Computer-Chip Issues

  • EV Battery Shortage Could Be Worse Than Computer-Chip Issues

    Global battery cell production is less than 10% of what the EV industry will need in 10 years.

    April 19, 2022

    EV Battery Installation

    ALEXANDRIA, Va.—There could be an electric vehicle battery shortage worse than the current computer chip shortage, says RJ Scaringe, Rivian Automotive’s CEO, reports the Wall Street Journal.

    EV batteries are made from cobalt, lithium and nickel. Each mineral plays an important role regarding the performance of the battery. Nickel boosts a battery’s energy density and range. Cobalt extends a battery’s lifespan, and manganese helps a battery operate safer at higher temperatures. All work together to help deliver a long lifespan and range and high performance.

    “Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years,” Scaringe told reporters last week. “Meaning, 90% to 95% of the supply chain does not exist.”

    Tesla CEO Elon Musk recently tweeted that lithium prices have “gone to insane levels” and that Tesla “might actually have to get into the mining & refining directly at scale.”

    Chinese prices for lithium carbonate have increased fivefold in price during the past year, possibly leading EV battery makers to increase prices by close to 25%, according to Morgan Stanley. Benchmark Mineral Intelligence says demand for lithium-ion batteries is up 400 gigawatt hours in 2021—up from 59 gigawatt hours in 2015—and it is expected to jump another 50% in 2022.

    According to Morgan Stanley, most EV batteries are manufactured in China, and manufacturers purchase the material on the spot market instead of through long-term contracts. (Read Fuels Market News’ analysis of China’s dominance in the lithium battery market in “Will China Be the New OPEC?”)

    The Journal reports that the Biden Administration has invoked the Defense Production Act to boost U.S. production of materials used in rechargeable batteries to curb American reliance on China for key ingredients.

    Demand for cobalt and nickel could exceed production in less than a decade, according to several studies. Cobalt has the most supply risks, as it has a highly concentrated production and limited reserves. There are not many producers of cobalt, with a single company producing one-third of the world’s annual supply, and 65% of cobalt coming from a single country.

    Some companies, such as GM and Tesla, are partnering with mining firms so they can have more secure access to battery elements.

    Scaringe also said that building the batteries will be another large hurdle to overcome as the U.S. tries to boost EV sales from a few million today to tens of millions within the decade. Even though companies are planning to add EV battery production, less than half of the factories expected to come online will produce cells with sufficient quality to supply global car companies, reports the Journal.

    “It varies by region, but it’s important for people to understand that capacity isn’t a quality, reliable battery supply,” said Simon Moores, Benchmark’s chief executive.

    Additionally, because the batteries in EVs are far different than the small batteries in gas-powered vehicles, the recycling or disposing of old EV batteries is a hurdle the industry also will need to scale.

    Visit the NACS Electric Vehicles topics page for more information about EVs. The NACS EV Charging Calculator was created to allow retailers to assess the cost and profitability of offering EV chargers at their sites. The calculator focuses on what retailer utility costs associated with EV recharging are and what the corresponding revenue must be to recover those costs after allowing for potential ancillary in-store visits and purchase profitability.