EV Battery Manufacturers Face Supply Shortfalls Amid Rising Demand

Electric vehicle (“EV”) batteries are the most important component of any EV. They are solely responsible for powering zero-emission EVs and are the most expensive component in the entire vehicle. Most battery electric vehicles on the market rely on rechargeable lithium-ion batteries for power. The thing about EV batteries is that their production requires rare, precious metals such as lithium, cobalt and nickel. However, only a few countries in the world have significant deposits of these minerals, and the mining of these minerals has raised ethical and environmental questions.

With electric vehicles getting even more popular amid increased awareness and a lot more options to choose from, demand for EV batteries minerals has gone increased. In fact, the entire electric vehicle supply chain is wracked with shortages as EV makers increase their lineups to meet consumer demand as well as adhere to increasingly strict emission standards. Even components such as graphite, which is usually quite easy to source, are now hard to come by. Unless the supply chain’s capacity to produce the needed metals including lithium, cobalt and nickel increases, EV makers may run into a major supply bottleneck in the near future.

However, the largest electric car makers in the country aren’t waiting for that to happen. Tesla, which essentially kicked off the EV revolution more than a decade ago with its Roadster, signed a contract with Australian mining company Syrah Resources to purchase EV battery metals sourced from mines in Mozambique. Battery makers have also been making major business moves. South Korean firm Posco, which is the world’s largest natural graphite producer, has purchased a 15% stake in the Chinese firm Inner Mongolia Sinuo New Material Technology Co.

Toward the end of the year, Hong-Kong based graphene manufacturing company Graphex Group Ltd. set up a subsidiary in the United States and revealed plans to build a facility on American soil. Graphex Group has also signed a deal with German company Desatec GmbH to process and sell graphite materials. This scramble for basic materials such as graphite shows just how bad the supply shortfall has become. What’s more, the supply issue couldn’t come at a worse time; most automakers are planning on increasing their EV lineups and have invested considerable capital in achieving this goal.

Furthermore, the automotive space is still reeling from a global chip shortage that has forced several of them to shut down production for a time. Only Tesla, which rewrote its own software to bypass the shortage, has been able to enjoy month-over-month sales records. As demand for EVs, such as those made by companies such as Nikola Corporation (NASDAQ: NKLA), continues to rise, we can expect the pressure on EV battery metal producers to increase.

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