R&D World magazine recently examined the global market for lithium-ion batteries and concluded that there could very well be a shortage in the next decade. They projected that recent investments will ensure supply keeps ahead of demand for at least the next two years, but that the demand for lithium in 2030 will be 2.3x higher than the global output in 2019, and investments may not be happening at the pace needed to meet it.
The main bottleneck is that it takes 5-10 years to bring a new lithium or cobalt mine online, but their low prices right now remove some of the incentive to make those investments.
In the absence or shortage of those investments, control of current resources will play a critical role in the production costs of lithium-powered equipment, including on-highway vehicles. In this area, as in many others, Tesla appears to be a leader. The electric car maker has made a number of moves recently to pursue vertical integration, including, most recently, signing a supply deal with Hanwha for battery production equipment. But they are also making moves to secure ownership of the raw materials needed for battery production.
Last year, they joined a mining consortium with Volkswagen and Daimler in Indonesia to ensure a steady supply of cobalt and lithium. This allows them to factor raw materials into the production cost of their cars as the production cost of the raw materials, rather than the market price of those raw materials.
The reason all of this is important is because lithium-ion batteries make up such a sizable percentage of the production cost of battery-powered vehicles, and the raw materials make up 79% of the cost of the battery. If the cost of the raw materials swings upward, as it did when the production cost of lithium nearly quadrupled between 2014 and 2018 and the cost of cobalt more than doubled between 2017 and 2018, electric vehicles can rapidly cross the line from affordable to unaffordable and back again. Ownership of mines gives electric vehicle manufacturers stability and predictability.
Source: “Keeping Battery Prices Low May Require EV Makers to Get into Mining”
Source: “Could There Be a Lithium-Ion Battery Shortage?”
PSR Analysis: As we at Power Systems Research try to accurately forecast the markets for battery-powered vehicles and equipment in our OE LinkTM Production database over the next 10 years, it is going to be impossible to predict when the cost of automobile batteries will fall (and stay) below the combustion-parity price of $100/kWh without paying close attention to the availability and ownership of battery raw materials. Our team of dedicated analysts around the globe and our specialists in both the on- and off-highway worlds are continuously tracking product announcement and market shifts to deliver added value for our clients who are trying to keep ahead of these changes. PSR
Tyler Wiegert is Project Manager and Power Generation Analyst
