Summary
- EV sales expected to increase sixfold by 2030
- Demand for EVs and battery materials could consume 95% of lithium supply
- Increased global demand for electric vehicles may strain supplies of raw materials by the end of the decade
- Competition for nickel may arise between the battery and steel industries
- Efforts being made to increase domestic battery production and explore alternative chemistries to ease pressure on raw material supplies
Article
McKinsey & Company predicts that the demand for electric vehicles (EVs) will increase sixfold by 2030, with sales reaching 28 million globally. This surge in demand could potentially strain the supply of raw materials needed for EV batteries. The firm estimates that battery materials could account for 95% of the global lithium supply, putting pressure on producers to keep up with the growing demand. Additionally, the increase in demand for NMC-chemistry EV batteries could lead to a potential shortage of nickel, despite anticipated increases in mining for this metal.
While McKinsey acknowledges an interest in LFP chemistry as an alternative to NMC, the dominance of NMC batteries poses challenges for the supply chain. The battery industry competes with the steel industry for nickel, with both sectors projected to consume more of this metal in the coming years. However, the cultivation of additional sources of raw materials and the development of alternative chemistries could help alleviate the strain on the supply chain. Efforts by the European Union and the United States to increase domestic battery production could also impact the supply scenario.
McKinsey suggests that several companies are exploring reuse, recycling, and alternative chemistries for battery materials as potential solutions to the supply chain challenges. These technologies could be implemented on a small scale before the end of the decade, providing some relief to the primary raw-material supply. Additionally, McKinsey’s analysis of battery raw-material demand aligns with its positive outlook on the EV market, attracting potential investors interested in the sector.
Contrary to McKinsey’s predictions, Goldman Sachs reported that EV battery prices could decline by 50% by 2026, driven by reductions in raw material costs such as lithium and cobalt. This discrepancy highlights the varying forecasts and perspectives within the industry regarding the future of EVs and battery materials. Despite the potential challenges in the supply chain, advancements in technology, recycling, and alternative chemistries could help mitigate the strain on raw material supplies for EV batteries.
As EV adoption continues to grow globally, the demand for battery materials is expected to increase significantly, posing challenges for the supply chain. McKinsey’s analysis suggests that the battery industry may face shortages of critical raw materials such as lithium and nickel, driven by the rising demand for EV batteries. However, efforts to develop alternative chemistries, improve recycling capabilities, and increase domestic production could help alleviate these supply chain pressures and ensure the sustainability of the EV market. Investors and stakeholders will need to closely monitor these trends to navigate the evolving landscape of the EV industry.
Read the full article here
