As sales of electric vehicles soar, the industry faces a host of bottlenecks: scaling up production of batteries and the raw materials that make them up takes time; global battery production is currently dominated by Asian companies; much of the raw material needed is extracted in unstable countries and/or countries with poor environmental and human rights records; and the extraction and processing of raw materials present environmental challenges that make it difficult to increase domestic production.
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Above: An electric vehicle sign painted on the ground. Photo: John K. Thorne / Municipalities Flickr
The steady stream of anti-EV articles and social media posts constantly remind us of all these issues, while insisting that the industry either ignored them or deliberately covered them up for some nefarious reason. In fact, automakers and suppliers have been acutely aware of these supply chain challenges for years, but it wasn’t until recently, as electric vehicles began to go mainstream, that they started to be covered by popular media. The recent passage of Inflation Reduction Actwhich contains measures to encourage domestic production of batteries and raw materials, has really brought these issues to the fore.
Some industry experts (among others) make dire predictions about impending shortage of critical minerals. An executive from a battery manufacturer recently told me that, although it only takes two years to build a giga-factory of batteries, it takes at least eight years, and sometimes much more, to bring a new lithium mine. Commodity analysts have also issued warnings about supplies of graphite, nickel, cobalt and a long list of specialist materials needed for batteries.
While the bottlenecks are real and call for bold action by automakers, suppliers and governments, those making the most pessimistic predictions are surely underestimating the importance of human ingenuity (and the human desire for profit).
A recent Bloomberg article highlights a recent example of how a predicted shortage did not materialize, due to both supply and demand side efforts. A few years ago, the prophets predicted a crippling cobalt crisis, just as they now predict an impending lithium shortage. However, in the event that cobalt prices have fallen about 40% from their highs earlier this year.
As Colin McKerracher reports, this is largely due to supply-side measures. Mining giant Glencore increased production at its Mutanda mine in the Democratic Republic of Congo by around 40% in the first half. (Glencore has been accused of a long list of human rights, environmental and corruption abuses in the DRC and elsewhere, but that’s the subject of another article.)
Clearly, higher prices incentivize mining companies to increase supply. But the cobalt market has also been hurt by demand-side moves, with battery makers and automakers scrambling to use less of the problematic element. In 2018, according to Bloomberg, 86% of all electric vehicles sold used cobalt-based chemical batteries. By 2020, that proportion had fallen to 83%, and it is expected to fall to 60% this year.
Automakers are increasingly choosing lithium-iron-phosphate (LFP) chemistries, which do not contain cobalt, for several reasons besides a desire to avoid controversy – LFP batteries are cheaper and have other technical advantages that make it a good choice for certain types of vehicles. Chinese automakers have paved the way for the adoption of LFP—BYD and CATL have been using chemistry for some time – and Tesla began to offer choice to buyers between two alternative battery chemistries at the end of 2021.
You’re here now uses LFP batteries for the standard range Model 3 and Y-model produced in China. According to Bloomberg, almost half of the vehicles produced by Tesla in the first quarter of this year used LFP.
Other automakers are beginning to phase in LFP batteries, to reduce costs and guard against supply bottlenecks. Volkswagen plans to include LFP batteries in entry-level electric vehicles from next year; Ford plans to offer an LFP option for its Mustang Mach-E and F-150 Lightning in 2023 and 2024; and Hyundai would also develop LFP packs.
Meanwhile, battery manufacturers are reducing the amount of cobalt they use in nickel-manganese-cobalt (NMC) batteries. Bloomberg’s McKerracher explains that early NMC formulations contained equal parts nickel, manganese, and cobalt, and were therefore designated NMC-111, but were later replaced by NMC-532, NMC 622, and more recently NMC 811. , which contains 8 parts Ni, 1 part Mn and 1 part Co (nickel is another metal that is expected to face supply issues, but like cobalt its price has fallen from earlier highs This year).
The story here is actually old: high prices for a particular material lead to increased production, which increases supply, and various innovations that reduce demand. It’s the invisible hand of capitalism at work, and it’s reasonable to expect similar stories to repeat themselves over time when it comes to other critical minerals.
It should be noted that there are two types of innovations that come into play to combat shortages. Companies that depend on a material that is in short supply are looking for workarounds that allow them to use less of it, in order to save money. At the same time, entrepreneurs are trying to imagine new products and/or processes that can minimize or eliminate the need for scarce materials – products they hope to sell to existing businesses in order to make money.
In the long run, the latter can be a more powerful force, as these innovations often come from young startups that think outside the box. For example, what is the demand for lithium, cobalt, et al could we reduce by allowing heavy-duty electric vehicles to run on smaller batteries? That’s what Momentum dynamics claims to offer, and although the company’s wireless charging technology has nothing to do with raw materials in itself, if it meets its requirements, it could have a big impact. What if we had batteries that didn’t use lithium at all? Companies are over there working on it.
“Whenever there is a boom in a particular material, there are always groups who claim that this time things are fundamentally different, that this time the supply curve is really inelastic, or that this time there is no There are no substitutes,” Mr. McKerracher writes. “These assertions are usually belied by the combined effect of price signals and ingenuity.”
Source: Bloomberg
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