Photo: Alexander Schimmeck/Unsplash
The Law of Supply and Demand works on the premise that all commodities and goods have a limited supply. The higher the demand, the higher the price. That is happening with semiconductors, fuel, and multiple other elements connected with the automotive world. Cells for electric cars face the same situation, but they present a side effect we have not talked about so far.
Just think about it: the more cars need 100-kWh battery packs, the higher raw materials for cells will cost. That will affect more than just electric vehicles: anything that uses a lithium-ion battery will also feel the consequences.
Nowadays, battery recycling largely depends on laptops, smartphones, tablets, and similar devices. Being so recent, electric cars only account for a fraction of the raw material source for cells compared to everything else that uses them and is now hitting the end of the lifespan. On top of that, battery packs no longer suitable for EVs can still have second-life applications such as energy storage before ending up in the recycle bin.
Whatever cells electronic gadgets can provide now turn into raw materials for new EV batteries, and, even so, recycling companies complain that they do not have enough to work with. If that’s the situation with the massive amount of electronic equipment that the world already uses, just try to imagine how things will be when automakers need to sell more EVs.
Ford, Volkswagen, GM, Daimler, and pretty much all other carmakers that already announced their electrification plans now talk about selling at least one million cars by 2025 or a bit later. Tesla said it wants to sell 20 million EVs, which is the best example of promises the company will not manage to keep, apart from robotaxis.
All these automakers know they must ensure battery supply as soon as possible. Volkswagen will announce on July 7 its plans for Salzgiga, which will probably be the name for its recycling plant in Salzgitter. For a company that wants to beat Tesla, Volkswagen seems just too fascinated by the competitor: it even repeats its naming strategies.
For all these companies to achieve their goals, there are only two alternatives: making sure mining will give them all the raw materials they need for their cells or buying all the batteries they can order. This second option leaves raw material supply problems with battery makers. It also places carmakers in a very fragile position that GM and Hyundai learned the hard way.
When you only buy your batteries, you have no control over how they are manufactured and do not develop the skills necessary to make better cells. Your only choice is to trust your suppliers will take good care of both aspects. LG Energy Solution didn’t, which led these two automakers to make $1 billion in recalls to replace the battery packs of the Chevrolet Bolt EV and Hyundai Kona Electric, respectively. GM even said it was teaching LG Energy Solution automotive quality control principles after announcing the recall.
If that was not a big problem already, believing a battery maker will ensure it gets all the minerals it needs is risky. If they don’t, they will not be able to deliver the cells they sold. There are contract clauses that can try to protect automakers from such a scenario, but they are not effective for the automotive industry. While they may impose hefty fines for contract breaches, it is doubtful that they could prevent the destructive chain reaction a lack of batteries could have.
Imagine that battery makers have a supply issue similar to the one car manufacturers are facing with chips. The difference is that some cars can move with fewer features if they have an engine: most automakers make them, so they do not depend on suppliers. A battery-electric vehicle (BEV) cannot move without a battery pack. When you consider that countries are discussing a combustion-engine ban as soon as 2035, automakers will be left with nothing to sell if they do not get the cells they need.
Extracting lithium, cobalt, nickel, manganese, copper, iron, and all other elements from nature is not an easy task. It requires heavy investments and the certainty that they will be compensated. Benchmark Mineral Intelligence has been warning about that for years.
Smartphones, tablets, laptops, and similar gadgets already have a mature demand and the potential to keep growing. The companies that make them probably have purchase contracts for years to come with battery suppliers, or produce the cells they need on their own. That may not prevent them from facing higher prices for the raw materials they need, especially with the demand leap for cells that EVs represent.
Of all the EV companies around, BYD seems to be the most prepared for this scenario. All its new products are based on LFP cells. They use iron and phosphate, which are cheaper and more abundant. On top of that, BYD makes its own cells, setting it free from suppliers. Tesla is buying cells from BYD.
All the other companies making their EVs with ternary cells will have to compete for restricted supplies of nickel and cobalt. You’ll remember that when you go shopping for new electronics. If inflation is not enough, their prices will soon scream that we need to cut carbon emissions on transportation. The increase may be gradual, but it will happen if the raw material supply does not improve drastically.
Brace for the impact that can have on anything that uses a lithium-ion battery.
Nowadays, battery recycling largely depends on laptops, smartphones, tablets, and similar devices. Being so recent, electric cars only account for a fraction of the raw material source for cells compared to everything else that uses them and is now hitting the end of the lifespan. On top of that, battery packs no longer suitable for EVs can still have second-life applications such as energy storage before ending up in the recycle bin.
Whatever cells electronic gadgets can provide now turn into raw materials for new EV batteries, and, even so, recycling companies complain that they do not have enough to work with. If that’s the situation with the massive amount of electronic equipment that the world already uses, just try to imagine how things will be when automakers need to sell more EVs.
Ford, Volkswagen, GM, Daimler, and pretty much all other carmakers that already announced their electrification plans now talk about selling at least one million cars by 2025 or a bit later. Tesla said it wants to sell 20 million EVs, which is the best example of promises the company will not manage to keep, apart from robotaxis.
All these automakers know they must ensure battery supply as soon as possible. Volkswagen will announce on July 7 its plans for Salzgiga, which will probably be the name for its recycling plant in Salzgitter. For a company that wants to beat Tesla, Volkswagen seems just too fascinated by the competitor: it even repeats its naming strategies.
For all these companies to achieve their goals, there are only two alternatives: making sure mining will give them all the raw materials they need for their cells or buying all the batteries they can order. This second option leaves raw material supply problems with battery makers. It also places carmakers in a very fragile position that GM and Hyundai learned the hard way.
When you only buy your batteries, you have no control over how they are manufactured and do not develop the skills necessary to make better cells. Your only choice is to trust your suppliers will take good care of both aspects. LG Energy Solution didn’t, which led these two automakers to make $1 billion in recalls to replace the battery packs of the Chevrolet Bolt EV and Hyundai Kona Electric, respectively. GM even said it was teaching LG Energy Solution automotive quality control principles after announcing the recall.
If that was not a big problem already, believing a battery maker will ensure it gets all the minerals it needs is risky. If they don’t, they will not be able to deliver the cells they sold. There are contract clauses that can try to protect automakers from such a scenario, but they are not effective for the automotive industry. While they may impose hefty fines for contract breaches, it is doubtful that they could prevent the destructive chain reaction a lack of batteries could have.
Imagine that battery makers have a supply issue similar to the one car manufacturers are facing with chips. The difference is that some cars can move with fewer features if they have an engine: most automakers make them, so they do not depend on suppliers. A battery-electric vehicle (BEV) cannot move without a battery pack. When you consider that countries are discussing a combustion-engine ban as soon as 2035, automakers will be left with nothing to sell if they do not get the cells they need.
Extracting lithium, cobalt, nickel, manganese, copper, iron, and all other elements from nature is not an easy task. It requires heavy investments and the certainty that they will be compensated. Benchmark Mineral Intelligence has been warning about that for years.
Smartphones, tablets, laptops, and similar gadgets already have a mature demand and the potential to keep growing. The companies that make them probably have purchase contracts for years to come with battery suppliers, or produce the cells they need on their own. That may not prevent them from facing higher prices for the raw materials they need, especially with the demand leap for cells that EVs represent.
Of all the EV companies around, BYD seems to be the most prepared for this scenario. All its new products are based on LFP cells. They use iron and phosphate, which are cheaper and more abundant. On top of that, BYD makes its own cells, setting it free from suppliers. Tesla is buying cells from BYD.
All the other companies making their EVs with ternary cells will have to compete for restricted supplies of nickel and cobalt. You’ll remember that when you go shopping for new electronics. If inflation is not enough, their prices will soon scream that we need to cut carbon emissions on transportation. The increase may be gradual, but it will happen if the raw material supply does not improve drastically.
Brace for the impact that can have on anything that uses a lithium-ion battery.
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