GlobalData: Western weaknesses in Li-ion supply chains will slow EV adoption, show China’s dominance of the EV market
Electric vehicle (EV) production is set to skyrocket to 12.76 million cars produced each year by 2026—with more than half coming from China. China also dominates the lithium-ion battery supply chain, specifically in terms of battery cells, cathode and anode production, and chemical refining.
While the Biden Administration’s $1-trillion Infrastructure Bill clearly focuses on electric vehicle (EV) development, both the US and the EU will remain dependent on China’s lithium-ion battery supply chain for the foreseeable future, according to leading data and analytics company GlobalData.
You can’t just click your fingers and make a fully working lithium-ion battery supply chain appear—it takes time. The recent decision by Johnson Mathey to withdraw from UK battery manufacturing [earlier post] demonstrates just how hard building a supply chain can be.
Western economies are quite far behind China already, with the country having held an 80.5% share of lithium-ion battery capacity in 2020. Even with the US and EU’s best efforts, China will still dominate by 2026, with an expected 61.4% share. Further, China is strikingly dominant in both chemical refining and the production of cathodes and anodes—all critical parts of the supply chain. In the meantime, the US and EU remain vulnerable in this important future market.—Daniel Clarke, Thematic analyst at GlobalData
GlobalData notes that the price of lithium carbonate is set to rise worldwide, from just over $10,000 in 2020 to nearly $14,000 in 2024.
The rising price of lithium demonstrates what many in the industry have warned about for some time: the growing divergence between supply and demand for lithium. Ultimately, this will lead to an increase in the price of EVs, as automakers pass the cost onto the consumer.—Daniel Clarke
GlobalData’s report, ‘Thematic Research: Electric vehicle batteries (2021)’, notes that one of the core challenges for EV adoption is keeping the cost of a lithium-ion battery as low as possible.
Batteries are already the most expensive part of an EV. Cell costs would need to be notably below $100 per kilowatt hour for mainstream production to take off, but this isn’t looking likely. Any increases in cost will be a blow to the decarbonization agenda of advanced economies, as well as lead to a deceleration in the decarbonization of the automotive industry.
To reduce future bottlenecks, governments at COP26 need to incentivize investment into new mines for raw materials needed in EV production, as well further develop sustainable lithium-ion battery supply chains. Unfortunately, mines can take up to seven years to build, and demand for EVs is increasing by the day.—Daniel Clarke