The electric vehicle (EV) industry has witnessed incredible growth between 2017 and the present day, and it is only expected to grow even more as demand skyrockets. But there is a problem within the supply chain that impacts the production of electric vehicles. This problem is the supply of batteries – more specifically, the supply of raw materials used in producing these batteries.

Global sales of EVs show a rise in the purchase of EVs; global EV sales in 2017 were more than 1.2 million units, and this grew to more than 2 million units in 2018 (this was an increase of 63%). Tesla sold and delivered nearly one million EVs in 2021. EVs are expected to be 10% of global car sales by 2025, rising to 58% by 2040. As more car manufacturers announce a transition to EVs, competition between car manufacturers will increase. The coronavirus pandemic strained the supply chains, but EV manufacturers have begun doubling down on production and sourcing of raw materials.

The Supply Chain for Raw Materials

Like most industries, the profit of the EV industry lies in producing goods in the most cost-effective but high-quality way; it is here that the EV industry faces a problem. The EV supply chain desperately needs to increase the production and processing of raw materials to match the estimated and probable growth mapped out for the industry. Although the cost of EVs has lowered as the years go by, we still see that the most expensive parts of these vehicles are the batteries.

Lithium-ion batteries are rechargeable batteries commonly used in cell phones, laptops, computers, and most other rechargeable electronic devices. EVs use lithium-ion batteries, and because of this, the demand for lithium-ion batteries has risen sharply in recent years and is expected to grow from $44.2b in 2020 to $94.4bn in 2025.

EV batteries are made of metals and minerals, including cobalt, nickel, lithium, copper, and graphite. These raw materials are produced in different locations across the globe. The EV industry is mainly focused in the US, Europe, and China; these raw materials often travel across vast nautical distances to get from the mines to the automaker. Sourcing these raw materials from different continents leads to a clunky supply chain. EV manufacturers face unnecessary costs rising from logistics or an increase in the price of raw materials and shortages of raw materials and EVs.

Another factor that causes problems and limitations within the supply chain for the raw materials is sourcing these materials. Cobalt is concentrated in the Democratic Republic of Congo (DRC), with 65% of the world’s cobalt coming from the country. But cobalt mining in DRC is closely tied to reports of child labor, human rights abuses, forced labor, and dangerous working conditions. These hazardous conditions underscore the fact that the DRC is one of the least developed nations in the world, and this is a testament to the exploitation that occurs because of cobalt mining.

Despite this, demand for cobalt may reach 430,000 tons within a decade – this is a 60% increase from today’s figures. The current capacity of mining cobalt means that it cannot meet the global demands, which will only lead to an unsustainable rise in prices. The demand for lithium is rising, and it is expected to grow exponentially. The growth of the EV industry will be responsible for more than 90% of the demand for lithium by 203. This growth predicts a massive expansion of the EV market, especially considering that lithium is also used in mobile phones, laptops, lubricants, ceramics, pharmaceuticals and is essential for solar and wind energy storage.

Lithium is the common denominator for how lithium-ion batteries work, even the next-generation batteries. Lithium does not face mining shortages like cobalt, but it is an essential component of lithium-ion batteries. More than 80% of the world’s lithium is mined in Chile, China, and Australia. China is in control of more than 50% of the world’s lithium refining and processing, and it has ¾ of the world’s lithium-ion battery mega-factories. Only 1% of global lithium is mined and processed in the US; US manufacturers will need to attempt to localize or diversify their lithium supply chain.

Is Recycling Old Batteries a (Solution to the Broken Supply Chain?) an Alternative to Mining?

Recycling has a huge role to play in the sustainability of EVs. One of the biggest sources of CO2 from the production of EVs comes from mining these metals and minerals and manufacturing battery packs; mining lithium produces enormous amounts of CO2. Recycling these materials will help EVs achieve carbon neutrality. Recycling old batteries might be one way to strengthen the weak supply chain; these natural resources are not infinite, and mining and processing these raw materials weaken the supply chain because there are so many points before they reach the manufacturer.

As demand for lithium-ion batteries and EVs grows, commodity markets will be under immense stress to match consumers’ demand. Recyclable batteries do not have to come from EVs – as long as they have the needed raw materials such as cobalt, lithium, nickel, etc., they are recyclable. Some startups are involved in recycling batteries that have reached their end of life. The recycling process includes collecting and gathering old batteries, refining and breaking the batteries down to recover the base metals, and then building them into new batteries.

There is a massive hurdle in recycling smaller consumer products such as old cell phones and TVs, and this means that many consumers have old electronics in their homes, offices, etc., that they don’t know what to do with. Consumers can drop off such old electronics at places like Salvation Army, Best Buy, Staples, or their local solid waste authority, after which recyclers can pick them up and destroy the data within them before refurbishing or extracting materials.

Recycling could be more efficient than mining in the long term. It uses less energy, water, and reagents than traditional mining processes. In the long term, recycling could be more profitable than mining because mining is dependent on the cost of raw materials. There is a need to be able to break down battery materials at the same rate that EVs are being manufactured.

Could recycling replace mining in the future? Recycling is poised to be a viable alternative to mining in the future, but, at the moment, it is cheaper to mine than to recycle (this is projected to go on for the next ten years or more). Recyclers do not get as many raw materials from recycled batteries as factories would from mining. It will take some time for a significant amount of EV batteries to reach their end of life.

The Way Forward

The current shape of the supply chain is not sustainable; at this rate, the state of the supply chain could cause a significant impediment to the growth of the EV industry. In February 2020, Audi temporarily ceased production of its electric SUV because of limited battery supply; Audi reduced the production of its electric SUV to 4,100 units when the original target was 1,600 units more than that.

The government, manufacturers, and suppliers have roles to ensure constant research and development that can sustain the supply chain and battery production. Manufacturers and giga-factories should look toward recycling end-of-life batteries to create the next generation of EV batteries; EV batteries mustn’t end up in landfills.

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Pavlo Prannyk
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