As electric vehicles grow more popular, carmakers face the threat of a global battery supply shortage for EVs as soon as 2025, according to a new study by Bank of America.
“Our updated EV battery supply-demand model suggests the global EV battery supply will likely hit [a] ‘sold-out’ situation between 2025-26, with its global operating rates reaching above 85%,” according ot the report
The report also notes Bank of America analysts expects the global battery shortages to intensify further in the period between 2026 to 2030 due to a continued increase in EV penetration across all markets, which reflects an “incrementally bullish” outlook for the electric-vehicle industry.
Bank of America’s Global Research arm raised its estimated global penetrations for all EVs, including battery electric vehicles and plug-in hybrid electric vehicles to reach 23% by 2025 and to 40% by 2030, hitting and 67% in 2040.
The study from Bank of America essentially was supported by a separate study by Ameya Joshi of director of emerging technologies and regulation at Corning Inc. presented during Automotive Futures annual Powertrain Strategies Conference, which focused on managing the transition from internal combustion engines to electric vehicles.
Big infrastructure investment required
Joshi estimated battery supply and related minerals will be a limiting step for EV penetration going forward.
If EVs share if the U.S. hits 25% by 2030, it will require the construction of at least 10 gigafactories in the U.S. to meet the demand for the batteries used in electric vehicles. If penetration of EVs reach 100% by 2040, it will require the construction of 40 battery-making gigafactories, Joshi noted during his presentation.
Most automakers have already recognized this trend. General Motors CEO Mary Barra’s been steadily announcing new battery-production facilities for its new Ultium technology. The company’s closing in on completion of its first plant in Lordstown, Ohio with partner LG Chem.
It announced a second facility will be built near its plant in Spring Hill, Tennessee where the Cadillac Lyriq will be produced and then revealed it has plans for two more plants.
Stellantis CEO Carlos Tavares told reporters during a recent Automotive Press Association event the company expects to build as many as five gigafactories as part of its $35 billion commitment to electrification, but he expected the number to grow beyond that in the future.
Shift in strategy
The steep demand is already forcing automakers to revamp their business strategies as they prepared for the change, according to Fitch Solutions, which is an arm of Fitch Rating Services. Automakers are employing varying strategies to ensure cost-effective and reliable access to the lithium-ion batteries that power EVs and are therefore essential to their electrification commitments.
For the high-volume OEMs, a unifying ambition is to reduce their technological, geographical and geopolitical dependence on individual suppliers, the report said.
“In some cases, those strategies extend to vertically integrating upstream activity as far as the extraction and refinement of the critical raw materials, creating a whole stream of activity outside of automakers core operations, numerous joint ventures and ultimately a new set of economic, political and operational risks,” Fitch noted.
Regardless of the specific strategy, Fitch says the overriding ambition is to develop more resilient and localized supply chains, which is congruent with a more regional emphasis of supply chains.
While automakers are looking for ways to build more batteries, they’re also exploring new battery technologies, such as solid-state batteries, which Toyota believes is the future of electric vehicles. Tesla’s changing the makeup of its batteries, reducing the amount of cobalt needed for them. Daimler CEO Ola Källenius announced the company was pursuing a revolutionary new battery technology as it converts to an all-BEV line-up by 2030.