Electric car demand supercharges lithium-ion battery market. Positive news?
Demand for electric vehicles, lithium-ion batteries accelerate

Electric car demand supercharges lithium-ion battery market. Positive news?

But questions remain around the supply of materials to make lithium-ion batteries, the resources needed to recycle/reuse them, and the carbon emissions associated with their manufacture, as Jessica Twentyman reports. 

When Volkswagen announced plans last week to have 16 factories around the world building battery-electric and plug-in hybrid vehicles in four years’ time, CEO Matthias Mueller was keen to stress that this doesn’t mean that the automaker intends to become a battery business.

“Building up [electric vehicle] expertise and mastering the technology does not necessarily imply that we want to start large-case manufacturing of batteries ourselves,” Mueller told a press conference in Berlin. “This is not one of our core competencies, and others can do it better than we can.”

Instead, the 11-brand conglomerate, which also owns Porsche, Bentley and Audi, will turn to specialists to provide the battery power it will need for an envisaged 80 new electrified vehicle models by 2025.

According to Mueller, VW has established partnerships with battery manufacturers for Europe and China, and awarded contracts to several suppliers worth a total of around 20 billion. These suppliers are known to include LG Chem, Samsung SDI, and the giant Chinese battery maker Contemporary Amperex Technology Limited, often referred to as CATL.

Read more: Battery breakthrough puts superfast-charging electric vehicles on road

The race for lithium and cobalt

The Volkswagen approach stands in stark contract with the model adopted by Tesla, which built its own ‘Gigafactory’, a giant battery factory in the Nevada desert, in partnership with Panasonic. This began production in 2017 and has reportedly has plans to reach a production target of 35 GWh in 2018, in order to support the Model 3 ramp-up. Meanwhile, Tesla has begun production of its highly anticipated solar roof tiles at its Gigafactory 2 facility in Buffalo, New York.

But, like Volkswagen, other legacy automakers seem far more likely to rely on specialists to supply their battery needs. After all, Volkswagen alone will require 150GWh-worth of batteries every year by 2025.

That means that the race is on for battery makers such as LG Chem and Samsung SDI to get their hands on as much lithium and cobalt as they can, as these are essential ingredients of the lithium-ion batteries used to power EVs.

According to data compiled by Deutsche Bank Markets Research, global lithium demand is set to increase almost threefold between 2015 and 2025, driven primarily by the EV and the energy storage markets. Meanwhile, analysts at market research firm Wood MacKenzie reckon that global battery consumption is expected by increase fivefold by 2025, and demand for cobalt for EVs is set to grow fourfold by 2020 and elevenfold by 2025.

Naturally, there are widespread concerns around the ability of battery makers to keep up with these levels of demand from the auto industry. A shortage of lithium or cobalt, after all, could present a major roadblock to automakers’ EV plans. And since supplies of both elements are frequently found in regions considered to be politically unstable, reasonable worries persist around supply chain disruption and price volatility.  

Read more: Business Secretary Greg Clark MP announces new national battery facility for UK

Hazards ahead?

It’s little surprise, then, that automakers are taking precautions. Volkswagen is already asking prospective suppliers to submit proposals based on supplying the company with batteries for up to ten years from 2019 onwards.

Toyota, meanwhile, announced last month that it has found a way to make EV production less vulnerable to any shortages in supply of the key elements needed to make batteries, by halving their reliance on rare earths.

But it’s not just the automotive manufacturers that need to keep an eye on the situation, according to a recent report from the Energy Transition Institute, part of global strategy firm AT Kearney.

With the electric vehicle and battery markets on the brink of “explosive growth”, governments must proceed with caution as they manage these fast-moving industries, say Romain Debarre and Daniel Gilek, authors of the report Natural Resources and CO2: Hazards Ahead for Battery Electric Vehicles?

Governments and city authorities may be keen to replace internal combustion engine vehicles (ICEVs) with cleaner alternatives, they write, but three problems present “significant and underappreciated” risks to growth.

Besides the potential scarcity of natural resources to make batteries, as mentioned above, there’s also the establishment of effective systems and processes for recycling/reusing batteries, as well as the risk that the widespread use of battery-electric vehicles (BEVs) may not actually reduce CO2 emissions below the level that would be associated with the continued use of ICEVs.

This is due to the manufacturing processes associated with building lithium-ion batteries and forecast increases in demand for electricity as more of us plug in our vehicles overnight rather than visit the petrol station. 

“In collaboration with various branches of industry – from miners to battery makers and car manufacturers – governments must manage the growth of these industries with care, improving power mixes to safeguard the environmental benefits of switching to BEVs, regulating to avoid pollution from used battery waste and to encourage appropriate technologies, while providing support for recycling and other nascent areas of business,” says the Energy Transition Institute’s authors.

In the interests of effective climate-change mitigation, sustainable industry growth and consumer satisfaction, they conclude, a holistic approach to managing the energy systems and technologies around EVs “has become more vital than ever.”

Internet of Business says

As with so many aspects of the connected world, much comes down to basic physics and the availability and sustainability of raw materials in a complex global market.

However, as a recent Internet of Business report revealed, alternatives to lithium-ion batteries may be on the horizon, via advanced polymers that have dielectric properties thousands of times greater than existing electrical conductors.

Research into battery technology by Surrey and Bristol universities, in partnership with Superdielectrics, could lead to electric vehicles that match the range of fossil fuel equivalents and charge in as little as 10 minutes, said our report.

Coming soon: Internet of Business will once again be holding its Battery & Energy Storage Show at Warwick University Campus in the UK on 5 & 6 December 2018. Attendees will have the chance to explore the role of these technologies in the three pillars of the low-carbon future: decarbonisation, decentralisation and vehicle electrification.