Automakers playing catchup for EVs supply chain

Battery Logistics

With the exception of Tesla and the Chinese maker BYD, all car manufacturers source their batteries from outside suppliers. That creates another dynamic alien to automotive giants. They can’t rely on their own technology. They must vie with competitors for the best batteries and place enormous bets on battery suppliers. These suppliers hold the cards, not the auto manufacturers, as enhanced battery performance is absolutely critical to the car’s success.

“If you have a component that everybody needs, such as a battery, it doesn’t matter whether you have a Gigafactory,” said Cullen, referring to Tesla’s mammoth, lithium-ion battery and car assembly plant in Nevada. “If you have the design of a new battery, you’re on the money. If your battery is 10 or 20 percent more efficient, you’re just going to clean up, because that is so central to the performance of the car.”

According to Benchmark Mineral Intelligence, Korea’s LG Chem is the world’s largest lithium-ion battery maker, with plants in Poland, China, South Korea and Michigan.  Second is China’s battery star, Contemporary Amperex Technology Ltd., usually known as CATL. That’s followed by BYD. Japan’s Panasonic is fourth and Tesla ranks fifth.

Battery supply chains themselves are complex and, these days, controversial. Attention is centered most on cobalt, a mineral necessary to keep batteries from overheating as well as helping them maintain their capacity as they are charged and uncharged. More than 70% of the world’s cobalt production is located in the Democratic Republic of the Congo. About one third of this is ad hoc and unregulated.

A group of stakeholders has formed a global battery alliance in an attempt to ride herd on standards. In a widely circulated opinion piece presented September at the World Economic Forum’s Sustainable Development Impact Summit, Michael Lightfoot, the chief corporate officer at LeasePlan, called on battery makers to be more transparent about where their cobalt is sourced. In addition, Lightfoot lobbied for a more sustainable battery production, including reuse and re-manufacturing. “Some 11 million tonnes of spent lithium-ion batteries are forecast to be discarded by 2030,” he wrote. “In our view, they need to be designed with circular economy principles in mind.”

The battery is at the heart of an EV, but it’s by no means the only part of an electric car that matters. Electronics and microprocessing are far more fundamental than gasoline-powered engines, although, admittedly, computers have become much more important in traditional vehicles as well.

This illustrates another critical difference between the traditional supply chain and the emerging one for electric vehicles. Car manufacturers must “have the components that deliver the solution,” said Cullen. “The difference between one company’s components and another company’s components may well be very great, much greater than you would get with a mechanical engineering.”