The electric car industry has no demand problem

Ford

As American (credit) card holders, we’re used to getting what we want, when we want it: terrifyingly fast Amazon deliveries. The equivalent of a Costco beef ranch. Oddities about Etsyand the fantasies whispered the night of Bring a trailer.

This is the first part of a two-part explainer on the electric car battery supply chain. Here’s how the auto industry painted itself into a corner. The next step is what he does to get his way.

With 200,000 reservation holders lining up, dreaming of dusting off gas-powered trucks, we can take the Ford F-150 Lightning as an example, illustrating how badly many Americans wanted an electric pickup. So much so that even Ford has been caught off guard and is racing to double Detroit production to 150,000 annual units by next year. Darren Palmer, Ford’s vice president for electric vehicle programs, told me that Ford also aims to triple Mustang Mach-E production, to 150,000 a year. This is what happens when EVs go from short-range, compromised economy boxes to fully realized wonders that make gas-powered versions seem nearly obsolete, in all areas from performance, pollution and NVH ownership costs for fuel and maintenance.

lightning ford

The demand for the Lightning, Palmer acknowledges, “has shocked everyone,” with Ford scrapping additional reservations for the time being.

“Even if we had a magic wand, we don’t have the mines and materials to provide these things.”

But there is a problem: a looming shortage of lithium-ion batteries that threatens to stretch electric vehicle lines even further, frustrate potential buyers and delay the transition from fossil-fueled transportation to cleaner and radically more efficient. It’s a disconnect between automakers’ optimistic projections of electric vehicle sales and the reality of the supply chain; a breach in the Red Sea worthy of Charlton Heston, with no sudden miracles in sight. And it has everyone from Elon Musk to Rivian’s RJ Scaringe raise alarms or suggest that things may get worse before they get better.

“We just don’t have the manufacturing capacity to meet the demand,” says Venkat Srinivasan, director of the Collaborative Center for Energy Storage Science at Argonne National Laboratory. “And even if we had a wand, we don’t have the mines and the materials to provide those things, so there’s a long-term challenge for the materials.”

On the topographic surface, it might seem like the automakers have it all covered: the Department of Energy has at least 13 new giga-factories that are expected to come to our soil by 2025, with around 300 gigawatt-hours (gWh) of new ability, almost all in the union-despising American South. That would be five times the current capacity of 60 GWh, with fast-growing electric vehicles now owning around 4% of the new car market.

lightning ford

Ford alone plans to add 60 new gigawatt-hours in North America by 2025, equivalent to current total US production, and 140 by 2030, including joint installations with SK Innovation (SKI) of South Korea in Tennessee and Kentucky. GM is preparing its first Ultium-branded battery plant with South Korea’s LG Energy Solution in Ohio, with others to come in Tennessee and two other locations. Stellantis, Volkswagen and Toyota are laying the groundwork for their own energizing battery operations. That 300gWh estimate doesn’t even include Tesla’s Austin factory, from which Musk hopes to accelerate the deployment of Telsa’s large format cylindrical cell – the long-awaited 4680, so named for its dimensions – to power its new generation cars. Tesla, well ahead of the curve in manufacturing its own batteries, says it has enough to sustain current production, at least until the laggard Cybertruck requests more capacity from Panasonic or other partners.

A Hummer guzzles 200 kWh, enough to power three smaller cars.

On May 2, the White House announced it would provide $3.1 billion to help companies build new battery factories or upgrade old facilities (plus $60 million for battery recycling), under the bipartisan infrastructure law passed last year. The Biden administration is aiming for 50% of new cars to be electric vehicles by 2030. Several automakers are also teaming up with their own lofty, perhaps unrealistic, goals for the transition from internal combustion to fuel. electricity.

That’s because experts don’t see the calculations add up. Especially because, as experts like Rivian’s Scaringe warn, a US supply chain for batteries essentially has to start from scratch.

rivian production

Srinivasan calculates that converting all new cars in America – figure 17 million in a good sales year – to electric drive would require more than 1,500 GWh per year in batteries. This represents an average 90 kWh pack in each car. (The Lightning and Rivian each pack about 130 kWh in their long-range packs, and a Hummer gobbles up 200 kWh, enough to power three smaller cars.) As things stand, America should increase its capacity to a factor of 25 to get there. Using the administration’s 50% target for 2030 would require 750 GhW, more than double the country’s projected total capacity in 2025 — and that’s assuming every last cell would go into electric vehicles. Grid battery storage, which will compete with EVs for capacity, may need 500 gWh or more. Better to crack.

We’re still waiting for a non-Tesla electric vehicle to break the Leaf’s US record of 30,100 sales in 2014.

Tesla, with new factories in Austin and Berlin, is now on track to sell at least 1.2 million electric vehicles worldwide in 2022. For everyone else, shortages of batteries, assemblies and Chips are already putting intense pressure on businesses and pain on showroom floors – including arm-twisting margins from some franchise dealers. (Is it predatory pricing or classic supply and demand? You decide.) Even if Ford can speed up the times in Detroit, the people in the back of the existing The Lightning line will surely wait until 2024 to show a truck in its driveway. Make them wait too long, and some customers will inevitably go elsewhere.

Until the whole electric vehicle ecosystem can grow, automakers – including giants in Europe and Asia with their own outsized electric ambitions – must fight for customers with a hand. tied in the back. Hyundai Motor can’t build its knockout team, the high-design Hyundai Ioniq 5, Kia EV6 and now Genesis GV60, fast enough. The Ioniq 5 is the first car in Hyundai’s history to first go on sale in Europe, rather than its home country, to help meet European regulations and scorching demand. This has salivating American prospects essentially in the third row, or cut entirely: the Ioniq 5 is only sold in 19 states that meet California’s emissions rules. It’s a similar story with Ford, which has sent the majority of Mexico-made Mach-Es to Europe, rather than America, even as it ramps up Mach-E production in China.

rivian production

Battery experts agree that current shortages may have been unavoidable. The automakers didn’t have the cars, so there were no customers – or vice versa, depending on your perspective. Without customers, vendors had no interest in developing technologies, tools and components for a worthless trickle of business, including insincere compliance car series. This chicken-egg conundrum tripped up every would-be electric vehicle maker, until Tesla came along. This includes Nissan (which had been making lithium-ion electric vehicles since the 1990s) when it pioneered the first Leaf around 2011. With extremely expensive lithium-ion cells at the time, Nissan was forced to create its own joint operations, in-house “spinel”-battery, which proved notoriously prone to trouble. The sheet’s already lean range quickly degraded, especially in the cookable southwestern climates.

japan january 24 japanese nissan factory in oppama, japan january 24, 2011 a worker installs battery chargers in bodies of nissan electric vehicle sheet on his assembly line at nissan oppama technical center in kanagawa pref photo by kasahara katsumi gamma rapho via getty images

Kasahara KATSUMI

It’s easy to laugh now at that quaint, shaky Leaf, its lean 24kWh pack and 77-mile range. Yet, as I have grown tired of mentioning, we are still waiting any non-Tesla EV to break the Leaf’s U.S. record of 30,100 sales in 2014. The Mach-E – a virtual Starship venture of power, endurance and technology over the Nissan of a decade ago – may squeeze in here in 2022, but the race remains tight.

This is clearly due to limited production, not consumer desire.

If Ford can hit its targets, the Lightning should be a shoo-in to set a US sales record for any electric vehicle not wearing a Tesla badge. Ford’s Palmer says the company is well aware of the issues, including the need to get the trucks into the hands of customers and convert them, perhaps for good. Three out of four Lightning reservation holders have never owned a Ford. Four out of five buy their very first electric vehicle.

“We know everyone will want these batteries because of the improvements in electric cars,” Palmer says. “We are rushing and we have entire departments fully focused on how we are going to source at the rates we have quoted.”

As automakers scramble to forge long-term contracts and secure their share of limited battery supplies, Palmer notes these are no small challenges. Massive scale and long-standing supplier relationships, he says, “can separate big players from start-ups.”