Interest in battery electric vehicles (BEVs) is growing, rapidly, driven by technical advances in range and economy, as well as by legal regulations. While these vehicles accounted for only 4% of passenger car sales worldwide in 2021, market observers expect this share to rise to over 30% by 2030. However, this surge in demand entails risks for the supply chain of lithium-ion batteries, the consulting firm Roland Berger has determined. This is especially true regarding the availability of raw materials. In a recent publication, the consultancy analyses these challenges and shows how companies can overcome them.
“Batteries are a key component for electromobility. Their costs depend on the respective cell technology, the production location and quite decisively on raw material prices,” says Wolfgang Bernhart, Partner at Roland Berger. “Increased raw material costs have already made electric car batteries massively more expensive in recent months. The war in Ukraine is exacerbating this dynamic.” According to Bernhadt, this will not stop the trend towards e-vehicles, but it could slow it down.’
The global market for lithium-ion batteries is growing by 30% per year until 2030. The increasing production puts considerable strain on supply chains. Most critical is the dependence on certain raw and refined materials such as cobalt and nickel sulphates and lithium. These materials account for more than 30 % of battery cell costs, with the cells accounting for about 75 % of the total cost of a battery pack.
In the study, Roland Berger experts identify four main areas of supply chain risk:
– Geopolitical factors: The mining and processing of important resources such as lithium is concentrated in a small number of countries. Nickel, for example, comes to about one tenth from Russia – with the consequence of massive price reactions on the commodity markets with the start of the war in Ukraine.
– ESG: Battery production has significant environmental and social impacts. Large amounts of water are used in the extraction of lithium and some production processes emit a high volume of CO2.
– Price: In addition to fluctuating prices for raw materials, the cost of additional production capacity in the “mine to cell” value chain must also be considered. Capital requirements of €250-300 billion are forecast for the next eight years, of which one third will be needed to meet European demand.
– Supply: The availability of certain materials is becoming critical. Temporary as well as long-term shortages are expected for nickel and cobalt or their sulphates and especially for lithium.
To avoid bottlenecks, changes are needed in the entire supply chain. At the production level, an integrated approach between metallurgy and chemistry can help reduce costs, Bernhart said. Greater regionalisation and co-location of multiple steps in battery manufacturing can also reduce geopolitical as well as ESG risks. In addition, recycling will play an increasingly important role from the end of the decade, he said.
As regulatory requirements evolve, companies across the value chain will find themselves increasingly obliged to adopt a circular economy for batteries. The potentially recyclable materials from batteries play a significant role in meeting the growing demand. “Strategically, automotive and battery manufacturers can also become more involved in upstream supply chains. This can range from long-term supply agreements to partnerships and investments,” says Bernhart. “Positioning yourself at all critical points along the supply chain is costly and time-consuming, but will provide a strong competitive advantage.”
The study “The Lithium-Ion (EV) battery market and supply chain” can be downloaded here.
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