The largest manufacturers of electric vehicles are warning that the ongoing supply chain issues together with the escalating raw material prices could jeopardize the ramping up and adoption of EVs despite the current huge demand for these vehicles in the world’s major markets. This warning was made last week during the 8th Future of the Car conference organized by the Financial Times.
Elon Musk, the CEO of Tesla Inc. (NASDAQ: TSLA), was first to sound the alarm. In his conference address, he stated that the previously announced target that Tesla would deliver 20 million EVs annually by the end of this decade was more of an aspiration than a promise. Explaining this shift in perspective, Musk added that his company predicts constraints in raw material availability over the coming years.
The Tesla chief singled out lithium shortages likely to occur in approximately three years, and he also mentioned that cathode production could also get problematic. These comments aren’t to be taken lightly, especially with the current chip shortage, which has curtailed production in the auto industry since the pandemic began. In fact, this raw material constraint is so serious that Musk noted that his company may end up buying a mining company in order to mitigate some of those raw-material supply issues.
Other EV industry leaders reechoed the concerns expressed by Musk. The speeches were notably reserved, and there wasn’t a single executive who announced a big production ambition in the foreseeable future.
It should be remembered that prior to this summit, several electric vehicle manufacturers, including Tesla, had announced price increases, while some, including Volkswagen, had revealed that they had hit the sales quota for this year in Europe and the United States. When a company says it has sold out even before the half-year mark, it means that demand is high but raw materials or production capacity hasn’t caught up.
Herbert Diess, the CEO of VW, said that lots of players in the EV space were overly optimistic when predicting the future of the sector. While his company had focused on overtaking Tesla by 2025, Diess now says that is a tight objective to attain. He added that raw materials, charging networks, energy and other elements were all needed if the automobile industry was to be electrified.
Analysts are also revisiting their predictions for the industry in light of the latest developments. For example Wells Fargo analysts have observed that the raw material challenges mean that making EVs similar in cost to ICE vehicles (cost parity) will be delayed by about a decade.
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