Berger Study: High Demand for E-Cars Leads to Battery Shortages

Against the backdrop of the ongoing boom in electric vehicles, the consulting firm Roland Berger has warned of supply shortages in batteries due to high demand for critical raw materials. In 2021, electric vehicles accounted for only four percent of global passenger car sales, but according to RB analysts, this figure will rise to over 30 percent by 2030. Such a surge in demand, however, brings new risks to the supply chain for lithium-ion batteries.

"Batteries are a key component for electromobility. Their costs depend on the respective cell technology, the production location, and decisively on raw material prices," says Wolfgang Bernhart, partner at Roland Berger.

Increased raw material costs have already significantly raised the prices of electric car batteries in recent months. The war in Ukraine further exacerbates this dynamic.

"This will not stop the trend towards electric vehicles, but it can slow it down," believes Bernhart.

New Risks in the Supply Chain

The global market for lithium-ion batteries is forecasted to grow by 30 percent per year until 2030. The increasing production puts significant strain on supply chains. The dependency on certain raw materials and refined materials such as cobalt and nickel sulfates as well as lithium is particularly critical. These materials account for more than 30 percent of battery cell costs, while the cells account for about 75 percent of the total costs of a battery pack. In the publication, Roland Berger experts identify four main areas of supply chain risks:

• Geopolitical factors: The extraction and processing of crucial resources like lithium are concentrated in a small number of countries. For example, about one-tenth of nickel comes from Russia, leading to massive price reactions in raw material markets with the onset of the war in Ukraine.
• ESG: The production of batteries has significant ecological and social impacts. Large amounts of water are consumed in lithium extraction, and some production processes emit a high volume of CO2.
• Price: Besides fluctuating prices for raw materials, the costs of additional production capacities in the "mine to cell" value chain must also be considered. Over the next eight years, a capital requirement of EUR 250 to 300 billion is forecasted, one-third of which will be needed to cover European demand.
• Supply: The availability of certain materials is critical. Shortages of nickel and cobalt as well as their sulfates, and especially lithium, are expected both temporarily and long-term.

With Recycling, Regionalization, and Vertical Integration
To avoid these shortages, changes across the entire supply chain are necessary. At the production level, an integrated approach between metallurgy and chemistry could help reduce costs, believes Bernhart.

"Stronger regionalization and coordinated site selection for several steps in battery manufacturing can also mitigate geopolitical and ESG risks. Additionally, recycling will become increasingly crucial by the end of the decade."

With the further development of regulatory requirements, companies throughout the value chain will increasingly feel obliged to introduce a circular economy for batteries, according to the forecast. Potentially recyclable materials from batteries play a significant role in meeting the rising demand.

"Strategically, automotive and battery manufacturers could also become more involved in upstream supply chains. This can range from long-term supply agreements to partnerships and even investments. Positioning oneself at all critical points along the supply chain is complex and costly but will provide a strong competitive advantage," outlines Bernhart.