Is there enough raw material for electric car batteries

Sep 08, 2022 at 10:17am ET

Automakers already made it clear that the rules that will be put into law thanks to the Inflation Reduction Act will likely cripple EV producers long before promoting them. This is because the US simply doesn't have the battery material mining operations in place that are needed for the growing number of EVs on the road today. Now, the CEO of Piedmont Lithium is chiming in.

For background, the new US federal electric vehicle tax credit has strict requirements related not only to the EVs being manufactured in North America, but also to where the materials are sourced from. More specifically, the EVs' batteries must be made with materials sourced domestically, or from a country that has a free trade agreement with the US. The rules aren't as strict initially, but by 2026, vehicles will need to have 80% of critical materials sourced based on the rules.

Having rules that help make the US less reliant on other countries is arguably a positive. However, it's going to take some time for the country to catch up when it comes to lithium extraction and processing. Piedmont Lithium CEO Keith Phillips told Yahoo Finance Live in a recent interview:

“Yes, we’ll [eventually] have enough, but not by that time. There’s going to be a real crunch to get the material. We don’t have enough in the world to turn that much [lithium] production in the world by 2035."

While we never suggest relying on one single individual to tell it how it is, the CEO of Piedmont Lithium probably has a pretty solid grasp of the supply and demand issues related to battery materials. Moreover, as we continue to add more electric cars to the mix, the materials will become more scarce.

In the meantime, companies are trying to do what they can to find solutions, but there simply aren't enough facilities or workers to make anything happen immediately. This is all contributing to the fact that lack of supply and growing demand are causing battery material prices to rise when we have been repeatedly promised that EV batteries are going to get cheaper over time.

Despite the challenges that lie ahead, President Biden has set a goal that all new cars sold in the US by 2030 must be electric cars. To encourage people to make the switch, they'll be afforded a credit of up to $7,500. However, once the new rules officially kick in, most EVs sold in the US will no longer be eligible for a credit. It will take time for automakers to put the right pieces in place to ensure that their electric vehicles are eligible for a tax credit.

Piedmont Lithium is one of only a few lithium mining companies in the US. It has already announced plans to begin construction on a new lithium processing facility in Tennessee in 2023. It also has another similar project planned for North Carolina thereafter. CEO Philips expressed:

“The world has changed. We're now in an era where everyone's going to want an electric car. The car companies can't make them fast enough, and people are now looking for the lithium they need for the batteries to go in those electric cars.”

That said, Phillips is looking at a very long road ahead. He told Yahoo that the US has a very slow permitting process, which makes matters even worse. China continues to dominate the industry, and Australia and Chile are the largest lithium producers in the world. Phillips notes that lithium-related projects get permitted in Australia in less than a year, while it has taken as many as eight years in the US, though some permits only took two years, which is still way too long.

As automakers move to expand electric vehicle production, not enough raw materials — such as lithium — are being mined for batteries. Automakers are now directly sourcing raw materials from mines.

LEILA FADEL, HOST:

Do these high gas prices have you thinking about buying an electric car? Automakers would love to sell you one. They're betting their futures on it. But this big transition depends on mining, digging a lot of stuff out of the ground, minerals like lithium, nickel and cobalt that go into those giant batteries. As NPR's Camila Domonoske reports, this existential challenge is remaking the auto industry.

CAMILA DOMONOSKE, BYLINE: When automakers want, say, a steel part, they don't call up an iron mine. They call up a supplier, who calls their supplier, who calls their supplier. But as automakers stake hundreds of billions of dollars on battery-powered cars, they can't be sure the supply chain will deliver what they need. For instance, they'll need more lithium than the world even makes right now.

ERIC NORRIS: You can't just go and secure supply 'cause it doesn't exist for the future. It has to be built.

DOMONOSKE: Eric Norris is an executive at a major lithium producer called Albemarle. Over the last year or so, his company started getting calls from automakers, which never used to happen.

NORRIS: We went from, who is Albemarle? - to, we need to be partnered with Albemarle.

DOMONOSKE: It's not just Albemarle. It's everywhere - GM investing in a California mine, BMW buying lithium from an Australian mine, Volkswagen signing contracts with a German one. Companies are still focused on putting parts together with robots and assembly lines, like this.

(SOUNDBITE OF ASSEMBLY LINE AMBIENCE)

DOMONOSKE: But now they're also thinking about raw materials, like this...

(SOUNDBITE OF PUMPING WATER)

DOMONOSKE: ...The lithium-rich water that Albemarle is pumping in Chile. And to help wrap your head around the change that's happening here, it might help to think about...

(SOUNDBITE OF ICE CREAM TRUCK JINGLE)

DOMONOSKE: ...Ice cream. You could buy a scoop from a truck or a tub at a supermarket. Or you could buy milk and make your own ice cream if you wanted to get more involved. But an automaker ordering minerals directly from Albemarle - that would be like calling up a farmer to order up a cow because you want ice cream next year. It's way more work. Like a lot of things about electric vehicles, Tesla led the way. They've talked to mines for years. Vivas Kumar used to work at Tesla, sourcing battery materials.

VIVAS KUMAR: It was a matter of survival to get reliable, consistent supply of the materials used to make battery cells that go into the vehicles.

DOMONOSKE: Now every automaker sees this as a matter of survival. Raw materials could determine how many electric vehicles they can make at what cost. Scott Keogh is the CEO of Volkswagen of America. He says this moment is transformative, but it's also kind of a throwback.

SCOTT KEOGH: The historical automotive business was deeply integrated. You would have rubber plants in Brazil and steel manufacturing plants, and you had all of this on your books.

DOMONOSKE: But the modern auto industry was pushed by investors to split up and just buy rubber and steel from suppliers. To use the ice cream metaphor, why own the cow when you can buy the milk for cheap?

KEOGH: And that's been the story for the last three decades, four decades.

DOMONOSKE: Now the industry is going in reverse, not just on lithium but on a range of mined goods that go into batteries.

KEOGH: We are not going to become a mining company. But certainly, we will get significantly closer.

DOMONOSKE: This shift could shake up the mining industry. From child labor in the Congo to pollution and deadly accidents around the world, an anonymous mine can often shrug off a bad reputation. But automakers care a lot about what the public thinks about them. Aimee Boulanger is with the Initiative for Responsible Mining Assurance. She says automakers are pushing mines for more transparency and audits of their practices. She compared it to the way activism over blood diamonds helped reform mines, except bigger.

AIMEE BOULANGER: When the auto sector came in, they changed everything because the volume of what they buy is so different than all the others. That was the moment.

DOMONOSKE: Meanwhile, for automakers, getting involved so early in the supply chain is expensive, and it carries some risks. But with their futures riding on electric vehicles, companies say they can't afford not to dig into mining.

Camila Domonoske, NPR News.

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