Europe’s carmakers face raw material bottleneck for EV batteries

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  • Car makers are investing heavily in battery cell production
  • Investment in raw material extraction has lagged
  • Companies vie for supply of Lithium, Nickel, Cobalt
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FRANKFURT, Oct 13 (Businesshala) – Major carmakers such as Volkswagen (VOWG_p.DE), Daimler (DAIGn.DE) and Stelantis (STLA.MI) are rushing to secure battery cell supplies in Europe, but they need a Finding enough battery raw materials may face great challenges as they seek to go electricity.

Failure to obtain adequate supplies of lithium, nickel, manganese or cobalt could slow the transition to electric vehicles (EVs), make those vehicles more expensive and jeopardize the carmaker’s profit margins.

“It’s a serious question whether supply can keep up with demand in the battery supply chain,” says Daniel Harrison, an auto analyst at Ultima Media.

Until recently, Europe was seen as losing out on batteries from major Asian manufacturers such as CATL (300750.SZ) in China, South Korea’s LG Chem (051910.KS) and Japan’s Panasonic (6752.T). Was, says Ilka von Dalwig. From EIT InnoEnergy, which has established a company network funded by the European Union in the “European Battery Alliance”.

“Nobody saw it as a problem,” says von Dalwig. “The thinking was that we could import battery cells.”

But forecasts from banks like UBS that EV sales will rise in the coming decade shook the political establishment and carmakers, and forced them to rethink battery production.

lots of battery plants

This was followed by an EU funding program of billions by car manufacturers and suppliers and the announcement of a major battery plant. Volkswagen is planning six battery plants in Europe alone, while Daimler will build four with partners.

Recently, battery cell factory announcements have been thick and fast, and EIT InnoEnergy now lists about 50 planned projects in the EU.

If all those plans become a reality, local production should meet demand around 2030. About 640 gigawatt hours (GWh) will be available, enough for an average annual production of 13 million cars.

By 2030, Ultima Media estimates supply will be 2,140 GWh globally, with demand at 2,212 GWh.

Altima Media’s Harrison Project Volkswagen’s six planned plants will allow the Wolfsburg-based company to meet about two-thirds of its battery needs.

supply chain gap

The problem is with raw materials such as lithium, nickel, manganese and cobalt.

Market experts at Benchmark Mineral Intelligence (BMI) speak of the “great raw material disconnect” – high investment in SAIL factories, but missing investment in raw material extraction.

Within a year, the price of lithium carbonate has more than doubled, explains Casper Rawls, head of price and data analysis at BMI.

In the case of cobalt, where the largest reserves are located in the Democratic Republic of the Congo and are sometimes extracted under miserable working conditions, an increase in price is also expected.

At the beginning of the supply chain, new mines take about seven years to develop.

“Europe is not the only region raising its e-car goals and reducing CO2 emissions,” Rawls said.

A global race is underway.

The automotive industry is currently facing painful production disruptions due to semiconductor shortages.

Some carmakers, including Volkswagen, are trying to secure the supply of raw materials with special supply contracts.

So far, lithium has mainly come from Australia and Chile, cobalt from Congo and graphite from China. The largest processors of cathode and anode materials are also located there and in Japan.

But imports could become more expensive due to increased tariffs in trade disputes and hampered by logistics problems, as shown in the recent tanker accident blocking the Suez Canal.

And long trips are bad for those focused on making batteries with as little CO2 emissions as possible.

domestic resources

One answer is investment in the extraction of raw materials in Europe – lithium is exclusively available.

Startup Vulcan Energy is working on obtaining lithium CO2-neutralally from thermal waters in Germany’s Upper Rhine plain and has already signed up Renault (RENA.PA) as a customer.

“We will need a lot of projects like Vulcan Energy – with one in each European country giving us the opportunity to build a supply chain in Europe,” Harrison says.

By 2030, EIT InnoEnergy estimates that Europe could have a quarter of the raw materials it needs, so is working on raising more funds that could trigger further investments.

Recycling is another option. But even here Europe is far behind China.

Currently, quality issues mean that only 10% to 20% of demand can be met from recycled materials, von Dalwig says.

There is a risk that the transition to e-mobility will be slow, Harrison says.

He says, however, that he believes the European Commission and EU member states will have to take action – such as more subsidies for the exploration and recycling of reserves – “because there is so much at stake both economically and ecologically.” Is.”

Additional reporting by Nick Carey Editing by Mark Potter

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