With the shortage of microchips hitting automakers hard, many are already seeing an even worse crisis on the horizon: that of batteries for electric cars.
For months now, we haven’t stopped talking about a crisis in microchips and semiconductors that seems to last for a while. Surely you have heard it in lots of media or even discussed it with your friends or family.
And the truth is that no one is really clear when it will end. But the worst part is that it could coincide with another crisis that would directly affect the motor industry and, above all, to the highly promoted rise of the electric car.
“About 300 terawatt hours are needed to transition the world to an economy based on sustainable energy”
It’s about the battery supply crisis for this type of vehicle, the demand for which has grown dramatically in recent years. And it is that, not in vain, the forecasts speak of 1 million electric vehicles sold each month in 2022. But, what is the real problem that is on the way to causing this crisis?
Raw material shortage
Lithium-ion batteries, currently used while solid-state batteries and many other variants are being finalized, require several raw materials that are not easy or cheap to obtain.
Currently, several of these materials are scarce in the mining market: missing lithium, nickel, manganese and cobalt, among others. Something that has made brands like Volkswagen or Daimler already compete with each other to take over the stocks that remain available through exclusivity contracts in some cases.
According to Rivian CEO RJ Scaringe, “semiconductors are a small taste of what we are about to feel with battery cells over the next two decades”.
“Most countries in the world will stop selling gasoline-powered cars. The scale of the change is difficult to appreciate in its full magnitude. The challenge is whether it is driven by politics or not. The companies that are going to survive are the ones that recognize that the final state of internal combustion is zero.Scaringe explains.
For its part, Elon Musk He recently noted that “last year there were a lot of supply chain issues with chips and this year there is still some shortage. Next year I think there will probably be issues with total battery production.”
“Our rough estimate is that around 300 terawatt hours are needed to transition the world to a sustainable energy-based economy.. That’s basically a bunch of batteries,” Musk said.
In fact, Elon Musk dares to predict that Tesla will deliver to its customers “20 million cars in 10 years”. And that’s just one of the many brands that already manufacture and market electric cars.
The graphite problem
If there is already a shortage of silicon to produce microchips, there is also a shortage of lithium for making batteries… and of graphite for the anode of this.
Benchmark Mineral Intelligence is the world’s leading regulated price reporting agency, a proprietary data provider and publisher of market intelligence for the lithium-ion battery to electric vehicle (EV) supply chain. Well, this organization anticipates that the demand for graphite will experience an increase of 18% on average each year until 2030even predicting that it will double between now and 2035.
This is very relevant because each electric vehicle uses between 50 and 100 kg. graphitewhich not in vain represents between 5% and 15% of the total cost of a lithium-ion battery.
China, which in 2021 it supplied 820,000 tons of natural graphite, is the country that dominates the world market and is responsible for 56% of the supply of synthetic graphite. Obviously, its production capacity is enormous, but despite this, China is not going to be able to cope with the strong demand for this mineral for use in electric cars.
According to Benchmark Mineral Intelligence estimates, by the end of 2021 there was already a shortage of 20 billion tons of natural graphite. And according to an industry source consulted by Business Insider, even then there was “not enough graphite on the market for customers to get hold of it. Y demand is growing rapidly, while the supply of raw materials is extremely tight».
This situation is aggravated by the energy crisis in China in 2021, together with the trade war with Australia and the increase in domestic demand. A compendium of events that ended up forcing the Chinese authorities to ration power to energy-intensive industriesincluding graphite.
All this, together with the growing demand for electric cars (also driven by the Russian invasion of Ukraine and its influence on the energy crisis) and the shortage of supply, are significantly raising the price of graphite. And this will result in an increase in the price of batteries and electric cars, since these represent between 20% and 40% of the price of an electric vehicleas published by DW.
S&P Global forecasts indicate that the demand for graphite will triple the current world production of this material by 2030. Currently, the production of this mineral is between 1.3 and 1.4 million tons per year and conservative calculations indicate that in less than a decade an additional 3.5 million tons of graphite will be needed per year.
The measures of the car manufacturers
This situation will not catch manufacturers off guard, who after the experience of microchips have rushed to take measures to minimize the possible effects of a battery shortage future.
As we indicated at the beginning in the case of Volkswagen or Daimler, there are many brands that negotiate agreements to guarantee the supply of batterieson many occasions exclusively.
In addition, there are not a few who have decided build your own factories for the manufacture of batteries, thus guaranteeing production at the most competitive prices possible. This is the case of Stellantis through its association with LG in Canada, Toyota in North Carolina or Volkswagen in Valencia.
The third way is the most daring and the one that, for the time being, has been least extended. Is about get into mining to do without intermediaries and be left at the expense of market supply and demand. Elon Musk himself recently acknowledged that high lithium prices could encourage Tesla to mine his own raw material in the future.
Can the battery crisis be avoided? If it occurs in the short or medium term, it seems clear that it will not be possible. But, in the long term, surely the solution lies in trust that the development of the many alternative technologies to the lithium-ion batteries that are currently under development allow the use of these raw materials to be considerably reduced. We will see what the future holds for us.