Data and analytics company GlobalData reports that weakness in availability of lithium-ion battery materials in Western countries is set to impede electric vehicle (EV) adoption and serves to demonstrate China’s dominance of the EV market.
China dominates the lithium-ion battery supply chain, specifically in terms of battery cells, cathode and anode production and chemical refining.
GlobalData notes that, with lithium prices set to rise throughout the next decade, the EV sector in the west will have to face rising battery costs; and if they pass such costs on to the consumer, EV adoption will likely accelerate at a slower rate than previously expected.
As such, GlobalData suggests that governments need to incentivise investment into new lithium mines; however, this will not be a quick solution as mines take about seven years to establish and EV demand is increasing daily.
GlobalData estimates that EV production will skyrocket to 12.76-million vehicles a year by 2026, with over half coming from China.
Nonetheless, GlobalData points out that while the US’s $1-trillion Infrastructure Bill clearly focuses on EV development, both the US and the European Union (EU) will remain dependent on China’s lithium-ion battery supply chain for the foreseeable future.
In this vein, GlobalData thematic analyst Daniel Clarke says a fully working lithium-ion battery supply chain takes time to establish. “The recent decision by Johnson Matthey to withdraw from UK battery manufacturing demonstrates just how hard building a supply chain can be.”
He adds that Western economies are quite far behind China already, with the country having held an 80.5% share of lithium-ion battery capacity in 2020.
Even with the US and EU’s best efforts, China will still dominate by 2026, with an expected 61.4% share.
Further, “China is strikingly dominant in both chemical refining and the production of cathodes and anodes – all critical parts of the supply chain” says Clarke.
He adds that, in the meantime, the US and EU remain vulnerable in this important future market.
Meanwhile, GlobalData notes that the price of lithium carbonate is set to rise worldwide, from just over $10 000 in 2020 to nearly $14 000 by 2024.
“The rising price of lithium demonstrates what many in the industry have warned about for some time: the growing divergence between supply and demand for lithium. Ultimately, this will lead to an increase in the price of EVs, as automakers pass the cost onto the consumer,” he says.
GlobalData’s report, titled ‘Thematic Research: Electric vehicle batteries (2021)’, notes that one of the core challenges for EV adoption is keeping the cost of a lithium-ion battery as low as possible.
Batteries are already the most expensive part of an EV, states Clarke. “Cell costs would need to be notably below $100/kWh for mainstream production to take off, but this is not looking likely.”
He says any increases in cost will be a blow to the decarbonisation agenda of advanced economies, as well as lead to a deceleration in the decarbonisation of the automotive industry.