Why We May Not Hit Electric Vehicle Targets – NOT Lack Of Charge Points!
Thursday, 4. July 2019
In a recent piece I wrote about the grave lack of charge points that will prevent people from buying or leasing Electric Vehicles (EV’s) along with the lack of range and the ridiculously high cost to buy an EV compared to a petrol or diesel car – we have another factor. Batteries.
Despite everything, we are starting to see a rise in EV sales this year that has taken manufacturers by surprise. One would think that the solution would be simple – up the production of EV’s and solve the problem. On the face of it, that should be the solution but it would seem that increasing the supply of steel or say plastic components would be simple, increasing the supply of batteries isn’t so straight forward.
This increased production needs to be planned years ahead so the fact that Hyundai sold its whole year’s allocation of Kona electric models by March and has a waiting list of 2,000, Kia has also sold out of its year’s allocation of 1,000 e-Niro models it’s put pressure on battery supply. And there simply isn’t the production capacity.
And the increased demand isn’t just the UK, global demand has shot up making the problem even worse. EV’s have suddenly moved from being in the doldrums to higher than expected demand causing car manufacturers to up the investment stakes into battery development and production. Nissan, whilst suffering low sales of their Leaf has now reached ‘Inflection Point’ according to Roel De Vries, corporate vice president, global head of marketing at Nissan.
In other words, demand has outstripped expectations. But, as he pointed out, increasing supply of batteries isn’t as simple as increasing order quantities or place additional orders with other suppliers. The global suppliers are at capacity and if new suppliers are to come online it will take two years to get from plans to production.
In order to address the problem Nissan has taken a stake in Automotive Energy Supply and Toyota has signed an agreement with Panasonic to develop and make Lithium-ion, solid state and next-generation batteries. Other manufacturers are following suit. Kia has partnered two battery producers in order to avoid future bottlenecks in battery supply.
The other issue is cost which needs to come down substantially. Currently, the battery pack in an EV represents 40% of the total cost of the car and this has reduced from 70% over the last 7 years. KPMG expect the battery cost to drop by another 50% by 2030 to 20% of the cost of the car as a result of cell chemistry and economies of larger scale production.
Autotrader have also pointed out that the cost of producing an internal combustion engine is around £1,000 to £2,500 whilst an electric powertrain is approximately £8,000. But in a typical contradiction whenever we discuss EV’s PA Consultancy predict that parity between electric car cost and diesel car cost will reach parity as soon as next year. Given supply and demand of batteries, I find that very hard to believe.
Tesla pointed out that under-investment in mining over the last few years has led to a situation where raw materials could be in seriously short supply. Lithium is limited and could be the first problem so mining companies are searching for areas to mine to increase supply. Nickel is also another metal that will give supply problems.
Beyond the metals we have Cobalt and other minerals that also have to be mined. And the problems don’t stop with the mining. Specialist group, Security of Supply of Mineral Resources (SSMR) have pointed out that 60% of the world’s Cobalt comes from the Democratic Republic of Congo controlled by Chinese traders who use child labour and low pay.
They warn that we need supplies from more stable parts of the world or risk being held to ransom by unscrupulous traders. Who said moving to electric vehicles would be easy? Probably the same people who predicted that leaving the EU would be a breeze! By Graham Hill
