The next constraint to the adoption of the electric car: raw materials

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posted on EVANNEX on June 09, 2022, by Charles Morris

The timeline of a transition to a new technology can be seen as a series of constraints— barriers that temporarily prevent new technology from replacing the old. These obstacles are not always technological, they are sometimes linked to economic or social factors.

Of course, for the croakers and bobo-birds of the world, every constraint or obstacle is a reason to ditch the new technology and stick with the old (electricity was too dangerous, the internet would never spread because it was too slow, etc.). Deeper thinkers realize that constraints (bottlenecks, obstacles, roadblocks – pick your favorite metaphor) represent opportunities for those who can find profitable solutions.

For most of automotive history, the constraints to the adoption of electric vehicles were technical: battery technology could not provide the range and performance required in a road vehicle, so that electric vehicles were relegated to niches in which those things were not important, but attributes such as silence (the UK’s milk floats) or the ability to operate in airless conditions (lunar rovers ) were critical.

The advent of the lithium-ion battery removed this constraint and the electric car continued to face the next set of obstacles, which were corporate and societal. Automakers had no interest in building electric vehicles, and consumers still viewed them as golf carts.

Tesla has carefully removed both of these obstacles, but the technological limitations have resurfaced in a new form. The Model S demonstrated that modern batteries could deliver much better performance than an ICE vehicle, but the price was still at the luxury level. As Tesla progressed through its three-part master plan, technological advancements and economies of scale drove battery prices down, and EV prices fell with them, then hit a brick wall.

As Tesla explained, once the Model 3 and Y took off, the company became constrained to production rather than demand. In other words, she could sell cars as fast as she could, even at high prices. Under these circumstances, simple business sense eliminated Tesla’s incentive to lower prices. Meanwhile, mainstream automakers, in part because of the famous innovator’s dilemma, still had little interest in selling electric vehicles.

So at this point, about two or three years ago, the biggest constraint to EV adoption was the fact that only Tesla was selling things in any volume, and you couldn’t expect single-handedly transforming the global transportation system. Fast forward to the present day, and that constraint has largely been eliminated. Several automakers have established themselves as competitors to Tesla and are now not only producing a larger selection of electric models, but actively marketing them.

Another set of constraints has been resolved: automakers are now eager to produce electric vehicles and consumers are eager to buy them. The price gap with traditional vehicles is still too big for low-income buyers, but thanks to a combination of higher gas prices, greater consumer awareness and just higher prices in general , wealthier drivers are willing to pay higher prices to go electric.

As one barrier falls, another appears, and now all automakers find themselves limited in their production, as anyone who has recently tried to order a new electric vehicle can attest. This is a temporary situation: major automakers have access to plenty of capital, and the most forward-looking are converting production lines to build electric vehicles and plan to build gigafactories to secure supply. in batteries. In about a year, they should be able to reduce the waiting lists.

So what now? Many industry observers believe that raw materials represent the next major hurdle in the transition to electric vehicles, and this hurdle could take a lot longer to clear.

As Dr. Qichao Hu, founder and CEO of Massachusetts-based battery maker SES, recently put it. Accused“It takes about 2 years to build a new battery gigafactory, but it takes at least 8 years (sometimes more than 10 years) to build a new lithium mine.”

Contrary to the flood of stupid articles warning that lithium will become “the new oil”, there is plenty of light white stuff, it’s the 25th most abundant element in the earth’s crust, and it is found on all continents. The problem is not availability, but the time required to increase production. “Most of the world’s major producing lithium mines already have their drawdowns committed to 2026, and the other junior mines have yet to go through exploration, feasibility, permitting and are many years away from production” , says Dr. Hu.

Other critical materials are also facing shortages. Commodity analysts ring graphite warnings, an essential mineral for battery anodes. Again, there is plenty of graphite, but the battery-grade graphite supply chain is not sufficient to meet the growing demand. Benchmark Mineral Intelligence predicts that a looming graphite shortage could “push back the timeline for broader electric vehicle integration.”

Two other pending pain points are nickel and cobalt. Tesla has been sounding the whistle about nickel for a while – last year it signed an agreement with BHP, the world’s largest nickel producer to obtain sustainably produced nickel in Australia. In January, the automaker signed an agreement with Nickel heel to buy quantities of metal from a mine the company is building in Minnesota.

Tesla and other automakers are also working on nickel and cobalt issues using alternative battery chemistries which use iron and phosphate, which have more stable and lower prices, instead of the more volatile Ni and C.

Other OEMs, such as Rivian, GM and BMW, are also paying a lot more attention to their battery supply chains these days, and some are following Tesla’s lead and turning to secure sources of raw materials. Automakers that take a proactive approach to addressing raw material constraints may well gain a competitive advantage in the market dominated by electric vehicles in the near future.


Written by: Charles Morris

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