Supply chain bottleneck strangling scale-up of lithium-ion battery production for EVs
Metal companies must scale-up quickly if enough lithium-ion batteries are to be made – and help automakers realise their “pipe dream” of a full transition to electric vehicles, say analysts.
While car brands like Volkswagen could aim to release the first ever “carbon-neutral car” at some point this decade, experts of the commodities world believe they must first get to grips with a supply chain that’s been largely alien to them until now.
And the major task for manufacturers will be solving the capacity issues in providing enough materials like lithium and cobalt to build the batteries.
Simon Moores, managing director of price reporting agency Benchmark Mineral Intelligence, told the energy industry conference IP Week in London last week: “Scale is by far the number one challenge.
“These raw material industries don’t have big thinking – they think in 1,000-tonne denominations, not 100,000 denominations – and short-term because no one wants to take the risk.”
Securing supplies, ensuring the quality of commodities and understanding speciality chemicals are other challenges but he believes automakers are now beginning to drive the supply chain with the aim of achieving price parity for EVs with petrol and diesel cars in the near future.
“They want to control the whole supply chain and drive down the cost on everything every year, no matter what,” Moores added.
Benchmark Minerals Intelligence MD Simon Moores speaking at IP Week in London (Credit: Twitter/Energy Institute)
“It’s an interesting culture clash, with automakers trying to negotiate the cobalt price when it’s run out – they’re not used to hearing that.
“But this circle is virtuous. Building gigafactories is giving confidence to automakers to build more EVs, this is giving confidence to the upstream raw materials guys to expand until about 2024 to 2025 – but what happens after that?
“The industry knows EVs are being built but the challenge is scaling up and removing bottlenecks – because if you don’t have the raw materials, the whole thing gets slowed down and that’s the big problem at present.”
Rise of electric vehicles and lithium-ion battery megafactories
A convergence of China’s growing fascination with electric vehicles, VW’s Dieselgate in September 2015 and the release of the first Tesla Model 3 six months later helped to spark a “true interest” in EVs globally, believes Moores.
This has also stimulated the rise of battery megafactories, with the absence of enough high-quality energy storage encouraging Tesla to bypass the middleman and open its first gigafactory alongside Panasonic in 2016, with two others since built and another in the pipeline.
Tesla is planning to open a gigafactory in Berlin (Credit: Flickr/Steve Jurvetson)
Foxconn Technology Group, the Chinese manufacturing giant that has made products including the iPhone and PlayStation 4, and South Korea’s LG Chem have also been drawn into making plans for plants.
The market size for lithium-ion battery cells has grown from 55 gigawatt-hours (GWh) in 2015 to 225GWh in 2020, according to Benchmark.
While there were three lithium-ion battery plants in 2015, there are now 121 either built or in the pipeline.
By 2029, the planned total capacity is 2,224GWh – roughly 10-times the current size and enough to power 38 million fully-electric vehicles – with new developments largely led by China, along with a supporting cast of Europe, the US and South Korea.
Moores said: “The question we get a lot around the world is ‘when is the electric vehicle thing happening? When is this party going to start?’
“Well it already has – it’s grown four-times in the past five years since we started in January 2015, but the challenge now is getting it to scale 10-times in the next 10 years.
“The industry needs outside companies coming to do that – it can’t do that itself because it doesn’t have the thinking or money – and that’s the opportunity for others.”
More materials needed to scale-up production of lithium-ion batteries for electric vehicles
To feed a 30GWh battery megafactory, 33,000 tonnes of graphite, 25,000 tonnes of lithium, 19,000 tonnes of nickel and 6,000 tonnes of cobalt will be required, claims Benchmark.
And these raw materials don’t come cheap, with the analyst estimating 79% of the cost to manufacture a Tesla Model 3 battery – which makes up 27% of the total vehicle cost – comes from the minerals, metals and chemicals that create the 4,416 lithium-ion cells used in the battery.
But there have been problems with matching surging demand with supply, given that these materials are produced at relatively low amounts and batteries are often only a small part of the industries.
For example, the price of lithium rose four-fold between February 2015 and November 2017, before settling by January 2020 at a level still relatively high historically.