Companies like Ford (F) are collectively pouring hundreds of billions of dollars into electric vehicles (EVs).
But as the industry moves towards zero carbon emissions, battery supply chains could stand in the way of those ambitions.
“First of all, batteries are the limitation here,” Ford CEO Jim Farley told Yahoo Finance Live (video above). “Both lithium and nickel are really the key constraining commodities. We usually source these from all over the world – South America, Africa, Indonesia. We want to localize that in North America, not just the quarrying, but also the processing of the materials.”
Farley pointed out that even raw metals mined in the US are often sent back to China for processing, which the US is actively trying to counter with grants and additional investment.
“The big change is going to be all that processing capacity onshore, but also mining in the US,” Farley added. “It’s going to be a huge job, just like with semiconductors.”
According to the International Energy Agency (IEA), electric vehicles accounted for about 10% of all vehicle sales worldwide in 2021. By 2030, BloombergNEF predicts that half of all U.S. auto sales will be electric vehicles, spurred by Inflation Reduction Act tax credits.
As demand for electric cars and trucks increases — and by 2030 an estimated 300 million electric cars would need to be on the roads to meet benchmark net-zero targets — so will demand for the valuable minerals used in batteries , climb .
That in turn could test the global supply chains that extract and process minerals.
The US has outlined five minerals it considers “critical” for the transition to electric vehicles and whose supply chains are at risk: lithium, cobalt, manganese, nickel and graphite. Legislators and representatives of the mining industry have already sounded the alarm about the mineral supply.
Keenan Kinder, shipping trainee, uses a forklift to move large sacks of lithium carbonate at an Albemarle Corp. lithium plant. to transport, Oct. 6, 2022, in Silver Peak, Nev. (AP Photo/John Locher)
“There’s going to be a real crisis to get the material,” Piedmont Lithium (PLL) CEO Keith Phillips told Yahoo Finance in September about lithium mining. Lithium is a key component in lithium-ion batteries, the most dominant type of lithium battery used in the EV industry and the type used by Ford. The average electric car battery uses around 8kg to 10kg of the metal.
The story goes on
“We don’t have enough in the world to shoot that much production in the world by 2035,” Phillips said. In particular, demand for lithium-ion batteries is expected to explode by more than 500% between 2020 and 2030.
Although the US has developed some battery production capacity, China dominates the market with more than 70% of the world’s EV battery production capacity within its borders.
Workers assemble battery packs at a factory of Sunwoda Electric Vehicle Battery in Nanjing, east China’s Jiangsu Province, Friday, March 12, 2021. (Photo credit should read Feature China/Future Publishing via Getty Images)
China is the largest producer of graphite, a key mineral used in lithium-ion batteries, but its strength rests mostly on its refining capacity. Once a raw material is extracted from the earth, it is sent to processors to purify the mineral, which is then sent to producers who make the batteries that go into consumers’ cars.
In total, raw minerals can travel up to 50,000 miles before reaching a battery factory.
However, as geopolitics, extreme weather and rising commodity prices threaten these supply chains, many US automakers are making concerted efforts to strengthen their own networks.
Ford announced in February an additional $3.5 billion investment in a new battery plant in Marshall, Michigan, as part of its $50 billion global push toward electrification. The automaker conceded a $2.1 billion loss at its Model E electronics division in 2022 and said it expects a $3 billion loss for the unit in 2023 as the company undergoes a restructuring and major changes investing in electric vehicles.
“We have to source these materials from around the world until we locate the supply chain, which is what we want to do,” Farley said. “By the end of the year we will secure all the raw materials to produce the 2 million batteries we will need for our vehicles by 2026. We should be in a good position here.”
Akiko Fujita and Yahoo Finance’s Pras Subramanian contributed coverage.
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