Times have changed in the world of electric vehicles. Tesla’s not the sole standard bearer for EVs anymore. Volvo recently announced each car will be either gas or diesel hybrids or fully electric after 2019. More affordable EVs have begun hitting the market. More than a third of all cars could be electric by 2040. With every carmaker vying for a seat at the EV table, demand for rechargeable lithium-ion batteries that go into electric cars is soaring. But whether supply of raw materials that make up the batteries, such as lithium and cobalt, can keep up with the growing market remains unclear.
“There was probably some belief in the industry that electric vehicles wouldn’t take off and it wouldn’t happen, but I think now everyone’s accepting the reality that it’s going to be here and it’s gonna be here relatively soon, and people don’t wanna be caught behind the curve,” said Caspar Rawlas, analyst at Benchmark Mineral Intelligence.
A day after Tesla announced it would produce significantly fewer Model 3s this year than originally planned for, the automaker also said it delivered only 22,000 of 25,000 produced vehicles due to a “severe production shortfall of 100 kWh battery packs, which are made using new technologies on new production lines.” A Tesla spokesperson denied that dwindling raw materials caused the shortfall of battery packs, but it shows how fragile the supply chain could be in the event of such a shortage.
In addition, Tesla did not respond to further inquiry on if the company is anticipating a potential lack of lithium or cobalt. General Motors chose not to comment on the topic either.
The silence from car companies on the issue could signal EV makers don’t have a solution to a potential raw mineral decline. Other electronic industries like computers and phones have a stake in a raw materials decline as well, but they won’t be hit as hard since the battery price for most consumer goods is a small fraction of the total cost, said Tam Hunt from the renewable energy consulting company Community Renewable Solutions LLC.
Car companies, on the other hand, could end up paying a great deal for the lithium-ion batteries—meaning their own hurry into the electric car market would be the EV’s demise.
“When we get to a point when there’s a number of competitive, relatively cheap electric vehicles on the market which, is coming around 2020, that’s when we’ll see potential problems,” Rawlas said.
The lithium-ion batteries used in electric cars (and a whole host of other electronics) are made up of many minerals aside from just lithium, like cobalt, nickel and graphite.
But the most crucial mineral for these batteries is, unsurprisingly, lithium. Last year, the global demand was 75,000 tons and by 2020, and Rawlas forecasts demand to approximately double. Automakers are projected to keep demanding more and more lithium as it rapidly increases electric vehicle supply.
The relatively-small lithium markets are no doubt going to undergo tremendous stress from increase in demand, including increasing exploration of what’s out there, but these are only short term problems.
“There’s enough lithium out there to meet whoever needs it now,” said Brian Jaskula, a mineral commodity specialist at the U.S. Geological Survey. “The supply/demand ratio really does depend just how quickly these cars are sold, but even if they are selling very briskly there may be a slight over demand of lithium, it’s just going to be a temporary thing.”
Cobalt, another mineral crucial to electric vehicle expansion, is another story. Its demand is expected to increase by 2020 as well by as much as 40 percent according to Rawlas, and it has become more important than ever over the last four years. But cobalt is much less prolific, currently concentrated in the Democratic Republic of the Congo and not many places else.
Here’s another problem. The DRC isn’t the best with human rights and ethical labor practices, potentially one of the reasons Musk vowed to use only North American resources for his Nevada-based assembly plant Gigafactory. But that’s simply not feasible. Two thirds of the world’s supply of cobalt comes from the DRC, and beyond that region it drops drastically.
There’s a global scarcity that’s unique to cobalt from other minerals used in lithium-ion batteries.
“Cobalt’s become almost as important on a dollar basis (as lithium). Hence the attention on that commodity this year, and why that commodity price has doubled,” said Trent Mell, president and CEO of First Cobalt Corp.
The cobalt industry is in its early stages, and it’s going to take millions of dollars in investment, and prices will rise with increased competition. Since the market is tight and demand for electric vehicles is only increasing, there’s a potential for the supply of raw materials to limit the amount of EVs we can produce.
“It’s something that’s probably the biggest inhibitor to the penetration of EVs,” Rawlas said.
When the cost of raw minerals surges from increased EV demand, Hunt said substitutions of different minerals than cobalt and lithium would make themselves available. Potential lithium substitutes in primary batteries include calcium, magnesium, mercury and zinc.
“These substitutes may all face similar resource constraints as lithium, but there is a fundamental difference between changing battery chemistries and finding substitutes for oil more generally,” Hunt stated in a 2015 report.
Another solution could be switching from lithium-ion to another type of battery, except all the alternatives are kind of terrible.
Toyota, Honda and BMW are famously experimenting with hydrogen fuel cells that combine hydrogen and oxygen to produce energy (and water!), but recharging stations are sparse. Other automakers are slow to catch on to this technology. Elon Musk even calls them “silly.” The first solar road that could power cars opened in France last year, but it was expensive and also terrible. Fisker dabbled into power via nanotechnology, but then it went bankrupt and made cars that set themselves on fire.
There are no clear front runners to be the next lithium-ion yet.