Electric and hybrid vehicles are on the rise, but that push for electrification could be facing a bumpy road ahead.
The U.S. far behind the rest of the world when it comes to battery production, but U.S. automakers need those batteries to produce electric vehicles (EVs). With every major automaker looking to make the switch, experts foresee a virtually unavoidable bottleneck in the battery supply chain.
The shortage of lithium-ion batteries also won't just affect the EV market. Phones, laptops, and other consumer goods also rely on these batteries. The massive surge in demand for EVs is also likely to put a squeeze on those markets.
"In a conservative scenario, we expect lithium-ion battery demand to increase at least tenfold between 2020 and 2030," Logan Goldie-Scot, the head of clean power research at BloombergNEF, told NPR.
It's not just the batteries themselves that are in short supply. Mining for the raw material, lithium, needed to make those batteries is also likely to need significant investment in the coming years.
The U.S. has plenty of lithium in the ground, but mining the material is expensive and difficult, according to an interview of Tesla's
In order to make up for the lack of recycled cars, Redwood is relying on recycled consumer electronics and scrap material from Panasonic, a joint venture partner in Tesla's Nevada gigafactory. So far, the company is taking in the equivalent of 30,000 cars worth of used batteries and is preparing to scale that amount as fast as they can.
While recycling may look like the best option, it's unlikely to actually solve the shortage, and certainly not anytime soon, according to insiders.
Managing director of Benchmark Materials Simon Moores told Axios that recycling batteries probably won't become a serious option for at least three years, and at best will account for just 10% of global lithium demand by the end of the decade.
"It won't come close to replacing the need for mined material," Moores added.
Mining itself is also unlikely to supply enough lithium to keep up with demand. This is partly due to a lack of investment, and partly due to the fact that mining companies have become skittish about scaling up their operations after a recent EV-driven expansion caused lithium prices to drop.
Beyond sourcing the raw materials, a large part of the problem is the lack of battery factories in the U.S. While the U.S. has just three such factories, China already has 53 battery factories in production with plans to build 107 total. The White House has expressed interest in tipping the scale back in the U.S.' direction, but factories still take time to build.
Despite the obvious need for these products and the materials used to create them, private investment in mining, recycling, and manufacturing lithium-ion batteries is lacking, largely due to the possible price volatility and long-term investment horizon.
"No matter how bullish or conservative you are on EVs, the next 10 years are going to be a form of chaos for the industry," Moores said.
Unlike their interest in the batteries themselves, investors seem more than happy to fund EV startups, whether they've produced any vehicles or not.
One small saving grace could be the auto-makers themselves. In the past, mining companies would have very little contact with the car manufacturers, instead selling to the battery manufacturers who then sold to the auto-makers.
With companies like Tesla bucking that tradition, other automakers have announced their intentions to deal with mining companies directly in preparation for the boom in demand for EVs likely to come in the next few years.
