One of the most significant differences between gasoline and alternatively powered “green vehicles” is the use of specialized power electronics components and batteries, which are present in all EVs and hybrids. Power electronics in green vehicles control electricity flow between cells, vehicle equipment and appliances, and from the charging station. And clearly, the battery retains that electrical charge until it needs to be recalled and converted in the mechanical energy.
Supply chain crunches in recent years mean that automobile manufacturing, particularly for green vehicles, has had trouble obtaining the necessary electronic components and materials needed to serve the vast electrical needs of modern EVs. This factor, unto itself, could considerably limit the growth of EVs and hybrids in coming years.
Batteries rely on four scarce materials
There are four materials that are critical to manufacturing lithium-ion batteries. A persistent threat to the most common cathode materials — lithium, cobalt and nickel –—or copper, which is used heavily in electric motors, could present a major challenge to EV makers.
According to McKinsey, a global management consulting firm, these materials already make up 50% of the cost of making a battery. In 2022, EV sales account for less than 5% of all vehicle sales, although this could increase up to 59% as soon as 2030. In the U.S., six states have announced plans to go all-electric by 2035.
However, increased scarcity of any of these materials will make it very difficult to reach those targets. Of them, nickel is likely the most precious, although all of them see projected shortfalls. Since the Russian invasion of Ukraine, the combined cost of the nickel, lithium and cobalt used in a lithium-ion battery increased by 430%. Technological compromises are possible, but unlikely unless forced. For example, EV makers could rely on smaller ratios of nickel, yet this would affect battery energy density and range. Or other industries, such as steel, may need to consider techniques using lower quality.
Major investments in new mines and mining technology will be needed within the next few years to ensure EV growth remains on par. This is a challenge as well — albeit a political one. China is a reservoir for lithium, and tensions between the PRC and Western nations continue to grow. Meanwhile, cobalt’s mining processes need careful examination on humanitarian grounds.
Automotive chips are tough to acquire
EVs use twice as many chips — on average 2,000 — as ICE vehicles. Many of the driver and passenger creature comforts and safety features are the same between EVs and traditional fuel vehicles. However, semiconductors play a significant role in the electrical systems of an EV, which are much more extensive than in an ICE vehicle.
For example, the battery management systems serve to manage the voltage, current, balance, charge level and health of the EV’s battery cells as well as other critical data like temperature. Semiconductors are also used to link range extender or regenerative technologies to electrical systems. At the charging station, chips are used to control services, distribute energy and communicate across networks.
In addition, EVs continue to be the early adopters of many ADAS and automated driving technologies. The sensors and transceivers that power the radar, lidar, camera, driver monitoring, traffic monitoring and other features are all reliant on semiconductors for basic energy management and conversion needs.
Infrastructure is important for EVs as it has to be built from the ground up in many cases such as parking garages. However, some companies are leveraging existing buildings and structures to limit cost expenses. Source: Blink Charging
Strategies for EV supply chains
EV manufacturing is also being disrupted by additional forces, like consumer demands, and industry trends and regulations. However, the industry is well equipped to deal with these challenges, as they are predictable. To deal with supply chain issues, EV makers should consider some basic economics.
There are five main stages in the electronics supply chain:
- Planning
- Sourcing materials
- Manufacturing
- Delivery
- Returns
The planning stage is the best opportunity for manufacturers to adapt. Organizations are utilizing numerous software tools. These tools include demand and inventory forecasting tools, shipping status tools and collaboration portal tools. This enables engineering teams to re-engineer designs or plan for manufacturing once the right parts are available.
Tesla resolves chip shortages by direct involvement in the manufacture of its batteries and rewriting software to make fewer semiconductors go further by dint of functioning more efficiently. Other automakers have scaled back features, like removing cylinder idle, or reducing production quotas in recent years. They are simply producing less cars, and it is driving the cost of new and used vehicles higher, as a result.
The adoption of new transparency and authorization technologies is also helpful. For example, Tesla uses blockchain technology to ensure that raw materials are obtained from sustainable sources. And the company is not alone — Renault, BMW, Mercedes-Benz and others are developing their own blockchain solutions.
Sourcing requires striking new deals with resource and raw material providers. This is going to require new reshoring and friend-shoring strategies, that are already formed or being identified, due to the ongoing global strife. As with the scarcity of battery materials, American EV manufacturers will need to become more reliant on lithium mines in Canada or cobalt mines in Australia. Manufacturers will need to expect to pay more for these resources. And this is as much foreign policy as business. Recent legislation and policies have reflected this need, so the soil is fertile for additional cooperation.
Manufacturing might need to be retooled in some ways as well. Ongoing shortages will mean consumers will need to extend the lifespan of their current products — including vehicles. A circular economy approach where electronic components are reused, repaired, redistributed and refurbished may address the challenge of e-waste, which is one of the biggest threats to resource sustainability in the electronics industry. Many manufacturers in the green automotive market are adopting reverse logistics management strategies by taking vehicles from customers and reengineering parts in end-of-life vehicles or reusing packaging.
It makes sense that to reduce the need for new materials, manufacturers should be optimizing the utility of the materials already in service or in their possession. This contrasts with the business practice of many electronic and mechanical devices in recent years, which can restrict a users’ ability to repair or modify things they bought due to nebulous intellectual property legal challenges. It is possible that chip scarcity may be a boon to right-to-repair laws and supporters. At times, manufacturers may find themselves with parts on hand for cars they can’t produce yet due to the semiconductor shortages. Tesla, finding itself with an oversupply of materials due to production delays, reportedly asked for partial cash refunds from suppliers for returned materials, a practice unheard of in the traditional electronics supply chain.
The road ahead
The pandemic didn’t cause the current supply chain crisis. Rather, it exposed what was already there: A fragmented linear supply chains model, lack of supply chain visibility and minimal collaboration with trading partners, according to SAP’s Etosha Thurman.
However, it is up to EV and hybrid automakers to adjust their current engineering practices, be it in the design or manufacture of these vehicles, to make better use of what components are available to them.
Meanwhile, consumers might need to expect an automotive future that is not like the one of the past — for so many reasons — but chief among them the relative expense of buying and operating a vehicle in a supply-crunched present.
