The electric vehicle (EV) market is on track to grow significantly this decade, with Deloitte predicting a compound annual growth rate of 29% for the market over the next 10 years.
However, the market’s future growth could be threatened by a global shortage of raw materials — particularly lithium and cobalt, which are both essential for manufacturing EV batteries.
EV Makers Face Shortage of Lithium and Cobalt
For automakers, the past two years have been almost defined by shortages and supply chain disruptions. Raw materials and essential components — everything from steel to semiconductors — have become more challenging to source.
As a result, many manufacturers have been forced to delay product launches and scale back production, in turn leading to a shortage of cars and EVs.
Recovery for the industry is in sight, and experts believe the semiconductor shortage is likely to end sometime in 2022 or 2023. However, a looming structural lithium shortage and supply chain weaknesses could threaten growth for the EV market, even as the auto market as a whole begins to recover.
Lithium is an essential raw material in the production of lithium-ion (li-ion) batteries. The extremely small size of lithium ions (second only to hydrogen and helium) allows li-ion batteries to hold onto more charge per unit of battery weight than other types of batteries — like the lead-acid batteries that cars use to power lights and other accessories.
Potential alternatives to li-ion technology exist — like sodium-ion, nickel-hydrogen, and hydrogen solution batteries. However, most of these alternatives are still experimental or otherwise impractical for market-scale use in automotive manufacturing.
How a Lithium Shortage Could Impact EVs
Steadily decreasing battery prices have likely helped drive the rapid growth of the EV market. Over the past decade, lithium batteries have become both cheaper and more efficient, allowing automakers to offer EVs with greater ranges at lower prices.
A reversal of this trend could make it much harder for manufacturers to meet the customer expectations that have enabled the EV boom so far.
Lithium prices are set to significantly increase over the next decade as EV demand grows, which will likely make it much more costly to produce batteries. Experts estimate that these price increases will begin to impact manufacturers sometime between 2022 and 2024.
If automakers pass the rising cost of lithium onto consumers, experts believe that EV adoption could slow significantly. EV automakers may also have to rethink plans to make their vehicles more affordable — like Tesla’s goal to manufacture a $25,000 EV in 2023.
Other raw material shortages, like a deficit of cobalt, could also increase the cost of battery production and further threaten EV market growth.
Recycling Could Keep EV Market Growing Through Shortage
The EV industry may need to adopt new strategies to increase the available supply of lithium. Recapturing the lithium it has already used to produce existing batteries may be one option.
Unlike lead-acid car batteries, which power a car’s accessories and last around three to five years, lithium-ion car batteries are built to last about 10 to 20 years or around 200,000 miles. Like lead-acid batteries, however, the lifespan of a lithium-ion battery can be significantly reduced by operating conditions.
Extreme heat and cold can accelerate battery degradation, reducing the battery’s maximum capacity quicker and eventually preventing the battery from working at all. Excessive use can also wear out a battery faster, and most batteries will suffer if allowed to completely discharge.
Modern EV batteries are built with these risks in mind and include components like battery heaters and coolers that help keep the battery within optimal operating temperatures. Even with this technology, however, EV batteries will eventually fail.
Dead lithium-ion batteries aren’t worthless — while they can’t hold a charge, they still contain the rare materials needed to manufacture new batteries. For this reason, experts believe that recycling could be essential to keeping the EV industry afloat, especially as lithium shortages and rising demand make it hard for manufacturers to meet customer needs.
Strengthening the Lithium Supply Chain
Even with an effective recycling supply chain, however, it’s likely the EV industry will need to shore up its lithium supply chain to ensure a steady supply for new cars. Right now, major lithium chemical operations are beginning to come online, like the Cauchari-Olaroz project in Argentina, which is slated to start production in mid-2022.
Outside the Americas, there are companies like Ganfeng Lithium — which plans to increase its lithium production from around 50,000 tons per annum in 2020 to 200,000 tons per annum in 2025.
These operations could help significantly increase the global production capacity of lithium, helping to mitigate the impact of the structural shortage.
Investing in projects like these could help automakers future-proof their industry and prevent the structural lithium shortage from becoming a long-term cap on the EV market’s growth.
How the EV Industry Can Prepare for a Lithium Shortage
Over the next few years, as the automotive industry recovers from shortages of key materials, the EV industry will begin contending with the structural lithium shortage. This shortage could significantly limit the production of electric vehicles or force EV makers to increase their prices.
However, a new EV battery recycling industry and investment in global lithium production could help offset the worst effects of the shortage. If automakers act now, they could minimize the impact that the shortage will have on EV production and prices — helping to maintain the growth the EV market has seen for the past few years.
Shannon Flynn is a freelance writer who covers IoT and business tech on Electrical Contractor, Embedded Computing Design, ReHack Magazine and more.