Regions Not Countries
Even before the shocks of the first half of 2020, lithium-ion battery manufacturers had begun to think in terms of regions of the world, instead of nationalistic countries. To that end, some of the major EV battery manufacturers are spreading their production plants around the globe. Korean giant LG CHEM, whose contracts include supplying General Motors, Volvo, Audi, and Volkswagen, has built its plants in Korea, China, in Ohio in the US, and Poland. Rival South Korean battery maker SK Innovations is building its own plant in the US in Georgia, and Chinese giant CATL is supporting its European ambitions with a plant in Germany.
Tesla has adapted to a regional strategy—the shorter-range version of the Model 3 that the company builds in its new Chinese manufacturing plant in Shanghai used lithium-iron-phosphate (LFP) batteries produced by Contemporary Amperex Technology (CATL). In addition to local production, the use of LFP removes expensive and politically problematic cobalt from the battery chemistry. But even companies like CATL were affected by the pandemic as a shortage of both raw materials and workers, as well as temporary shutdowns have reduced the number of batteries it will build this year.
Investing in Mining
Companies that are serious about electrifying their fleets, among them Tesla, VW, and BMW have invested in mining and raw materials suppliers to ensure a secure supply of lithium. “Automotive innovations, in the past, have started with vertically integrated supply chains,” Edwin Pope, principal automotive analyst, global light-weighting, at IHS Markit told Design News. “Sourcing and logistics of raw materials can greatly impact total battery cost. Early market predictions of BEV (battery electric vehicle) demand compared to supply chain capability led to automakers investing directly at the raw material level,” he added.
To secure raw material supplies for battery cells, the BMW Group signed a supply contract with Ganfeng Lithium Co., Ltd. based in Jiangxi (China) for sustainable lithium from mines in Australia. “The projected order volume totals 540 million euros. In this way, the BMW Group is securing 100% of its lithium hydroxide needs for fifth-generation battery cells in its high-voltage batteries,” said Dr. Andreas Wendt, member of the Board of Management of BMW AG responsible for Purchasing and Supplier Network in a November 2019 news release. The contract is for a term of five years (2020 – 2024).
“Alongside cobalt, lithium is one of the key raw materials for electromobility. With the signing of this contract, we are securing our lithium needs for battery cells,” continued Wendt. “We aim to have 25 electrified models in our line-up by 2023 – and more than half will be fully electric. Our need for raw materials will continue to grow accordingly. By 2025, for lithium alone, we expect to need about seven times the amount we do today.”
2020 is a Challenge
As reported in Forbes, in February of this year, Audi temporarily halted the production of its electric SUV the e-Tron, citing ‘battery supply bottlenecks’. It reduced its production to 4,100 vehicles, about 1,600 under its 2020 target. Jaguar Land Rover also interrupted the production of its I-Pace electric SUV and Mercedes paused its EQC due to the unavailability of lithium cathode materials for batteries. Audi and Jaguar both obtain their batteries from LG Chem from the South Korean company’s battery factory in Poland.
Although the price difference between an EV and ICE (internal combustion engine) vehicle is decreasing, EVs are still more expensive o purchase (but less expensive to operate). This makes the news from the International Monetary Fund all-the-more dire. The IMF June 2020 report projected global growth at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The report says, “The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.” Global growth for 2021 is projected at 5.4 percent, a 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. Less money means fewer people can afford to buy a new EV, stunting the potential for EV growth. Likewise, the recent crash in oil prices has made gasoline cheap, reducing the incentive to go electric.