1. Forecasts for the global electric vehicle market show there will be 44 million EVs on the road by 2030. Despite the move to de-carbonise the road transport market, the upfront costs of an EV is still prohibitive to the driver.
2. To lessen this cost burden for consumers, governments have been offering modest tax credits and purchase subsidies. While these subsidies will give some relief in the short-term, the longer term consideration is focusing on the costs of raw materials and ensuring a protected and uninterrupted stream of battery raw materials (BRMs).
MITIGATING RISKS TO ROAD TRANSPORT ELECTRIFICATION
1. Cell prices are vulnerable to both the cost of the raw material needed to produce them - particularly in the case of lithium, nickel and graphite - and an uninterrupted continuity of the global supply chain. To 2033 and beyond, Europe and North America will continue to be heavily dependent on imports as their current cell supply is meeting less than half of demand. China, however, has a surplus and will continue to dominate the export of BRMs in the foreseeable future.
2. To mitigate this, the EU and US will need to establish a midstream to shift China’s dominant position. This will mean a focus on localising supply chains to reduce their vulnerability of sourcing BRMs and market fluctuations. This includes introducing more subsidies and consumer incentives.
3. Current thinking in North America is a US$3,750 tax credit for EVs where over 50% of minimum value portion of components is manufactured or assembled in North America. The EU is looking at implementing a policy of no more than 65% of strategic raw material at any stage of processing can come from a single third country. Any hope of a domestic raw material industry will require the development of the midstream in anode, precursor and cathode production.
4. Ultimately, battery pack prices are forecast to decline but supply shortages could spoil the party.
AUTOMAKERS SETTING DEMAND WITH PACK SIZE AND CHEMISTRY CHOICES
1. As the automotive industry shifts towards zero emissions for all vehicles by the mid-2030s, the decisions the majors make will set the demand in the market. Larger battery packs offer extended driving ranges and greater performance so would be an attractive option for both manufacturers and consumers. In 2020, the average battery pack size was 51 kWh and by 2030 it will be 69 kWh. We forecast battery demand to double from 2022 to 2025, and double again to 2030 with SUVs mostly dominating the market. That is a significant increase that will need more BRMs.
2. Also, the chemistry of the batteries affects factors like charging speed, lifespan and overall range. Nickel-based chemistries will remain the favoured option for high range EVs but most automakers have now committed to using iron-based chemistries in models built outside China. By setting out demands on pack size and chemistry, automakers can accommodate a diverse range of customer needs but will also exacerbate the pressure on raw materials.
3. It is hoped that recycling, sodium-ion and next-generation battery tech could ease some of the pressure on the continual need for virgin materials.
RECYCLING AND NEW TECH
1. New tech and the recycling of scrap material offer opportunities to fill some gaps in supply shortages. But these opportunities are currently limited.
2. By 2035, China could have around 1 TWh of scrap available as a source for critical materials in the EV supply chain. The rest of the world would have a fraction of this total at their disposal. But it is still not enough. The global demand for scrap needed to make a dent in the need for raw material is forecast to be around 3.9TWh by 2035. This lack of scrap is partly because of the long life span of EVs.
3. Recycling, while beneficial, can contribute to a sustainable approach, but it cannot yet be considered a solution to shortages in supply.
4. Additionally, emerging technologies like sodium-ion (Na-ion) batteries are in their infancy and have the potential for use in short range EVs. While there has been an uptake of Na-ion technology in China this year, it is expected to be limited, particularly in the context of SUVs with longer ranges.
5. For smaller battery packs to become a more viable option, it requires the development of fast-charging infrastructure and advancements in battery technology. Enabling technologies like solid-state and semi-solid batteries play a crucial role in this, and companies like CATL are standing out with their announcements and efforts in this direction.
6. As always, technology is changing and major players are expected to roll out next-generation battery tech closer to 2030. These advancements are crucial in reducing our reliance on critical materials and enhancing the overall sustainability of EVs.
7. Global net zero targets and the EV landscape will turn the road transport industry upside down. In our ongoing analysis of electric transportation through our series: Electric Vehicle & Battery Supply Chain Service, we assess investment opportunities and cost-effective sourcing decisions within the EV and lithium-ion value chain.
Source:
https://www.woodmac.com/news/opinion/driving-the-energy-transition-the-ev-and-batteries-outlook/
