The wider availability of electric vehicles has played a major role in getting more people interested in them. However, analysts warn that a lack of lithium-ion batteries could stifle the surge in electric vehicle adoption.

Here’s a closer look at the matter and some details about the possible associated issues that could affect fleet owners.

Rising Electric Vehicle Usage Causes Elevated Materials Demand

The electric vehicle has experienced recent success that seems unlikely to wane. For example, a global electric vehicle report confirmed there were 2.1 million electric vehicles sold in 2019, which surpassed the previous year’s numbers by 6%.

However, the interest in those automobiles has been far more long-term. The report clarified that there were only 17,000 of them on the world’s roads in 2010. The total soared to 7.2 million by 2019.

Another section of the report goes into the materials required to make batteries for electric cars. The cars sold in 2019 required an estimated 65 kilotons of nickel, 22 kilotons of manganese, 19 kilotons of cobalt, and 17 kilotons of lithium.

However, the report estimates those amounts will rise substantially by 2030 due to ongoing interest in electric vehicles. More specifically, it could increase to at least 925 kilotons of class I nickel, 185 kilotons of lithium per year, 180 kilotons of cobalt, and 177 kilotons of manganese.

A Heavy Dependence on Imports

Most analysts agree that there is not an immediate shortage of lithium-ion batteries, but concerned parties should respond quickly to mitigate the possible effects. One reality is that many nations, including the United States, rely heavily on China to supply battery materials.

A February 2021 executive order from The White House involves looking at current supply chain risks in the United States, then exploring measures to tackle those issues. Batteries were not the only goods mentioned in the document, but the content specified examining concerns associated with critical metals.

Estimates suggest that China accounts for between 70% and 77% of the world’s rare earth elements. Moreover, that country owns most of the processing facilities, even if the source material comes from other places.

As recently as 2019, people became particularly concerned about those realities when tensions rose between the U.S. and China due to a trade war. Experts suggest that building more battery factories in the U.S. is an actionable strategy for lessening the nation’s need for Chinese exports.

That approach would also mean the batteries could travel shorter distances. Shipping the batteries from overseas requires the appropriate risk mitigation strategies, such as transporting them in explosion-proof refrigerated containers.

Domestic manufacturing makes sense, but it’s also not a quick strategy. Since the anticipated lithium-ion battery shortage hasn’t happened yet, there’s still time to figure out what to do when it does. Building factories will likely become part of a multipronged strategy.

Electric Vehicles Make Sense for Fleet Owners, Study Suggests

Outside of the threat of a battery shortage, other factors may cause commercial fleet owners to balk at the prospect of upgrading to all-electric models. However, a recent Berkeley Lab study illustrated some of the potential payoffs.

For example, researchers used current battery cost data and calculated that an electric long-haul truck gives a 13% per-mile decrease in ownership costs compared to the same kind of vehicle that uses diesel. The team also confirmed that electric fleet owners could achieve a net savings of $200,000 over a truck’s lifespan.

They confirmed that aspects like battery price drops and more aerodynamic designs for commercial trucks could slash the per-mile ownership costs by as much as 50% by 2030. The researchers believe that a significant shift from diesel to electric-powered fleets would cause a major reduction in greenhouse gas and particulate matter associated with the transportation sector.

A Battery Shortage Could Increase Buyer Costs

Electric commercial vehicles are still in the minority. It could take a while before that changes, but adoption rates should rise as more decision-makers see examples of successful electric commercial vehicle usage.

Analysts point out that electric vehicles could become about $1,500 more expensive if nickel prices eventually reach a historic high of $50,000 per tonne, though. That possibility could discourage fleet owners if they don’t take overall cost reductions into account.

Elsewhere, a 2019 study of American adults found that 60% cited high upfront costs as a negative aspect of electric vehicle purchase. Relatedly, 84% did not know whether their state offers incentives to offset those buying decisions. Promoting the availability of such programs could make electric vehicles more attractive.

Manufacturers Grapple With Assorted Supply Chain Challenges

Recent coverage also indicates that dealing with lithium-ion battery shortages could be more complicated than it first seems. Contrary to popular belief, there is not a lithium shortage, but rather a surplus. More specifically, Australia, which is among the top producers of lithium, has approximately double the number of mines now as in 2015.

However, certain places — such as the United States — have a lithium shortage compared to other nations. While the U.S. has small lithium deposits in California, they’re much smaller than those in South America and Australia.

A cobalt shortage is a more pressing concern, especially since most of it comes from the Democratic Republic of Congo. Cobalt is one of the most expensive components in an electric vehicle battery, and research suggests there’s not enough mining and processing capability to meet growing demands for it. This example shows that a cobalt shortage could relate more to the capacity required to reach the resource rather than the scarcity of the material itself.

A Dramatic Scaling of Resources

Celina Mikolajczak, vice president of battery technology at Panasonic Energy of North America, noted that lithium-ion battery technology features in numerous consumer devices. However, it’s not at the level required for electric vehicles.

She pointed out that whereas a laptop battery has a dozen cells, one for an electric vehicle has thousands. “How do you quickly scale an industry by 100 times?” she asked, before clarifying, “You need more raw materials, the skilled talent, and machines to extract the raw materials, the factories to process the raw materials into cell components, and then the factories to turn those components into cells.”

A related issue is that the parts required for a car with an internal combustion engine are not the same as those for an electric automobile. Electric vehicles have fewer parts, and the differences mean that a manufacturer could not swiftly pivot to making them after formerly producing autos with engines.

A strategy deployed by companies like BMW and Volkswagen is to invest in battery technology companies. Doing that could give them better access to emerging technologies compared to competitors that didn’t provide such support. That could prove crucial for business models concerning batteries made with more widely available resources. Tesla took another approach by entering long-term agreements with suppliers. Such arrangements allow better pricing.

A Complex Matter

A lithium-ion battery shortage could affect consumers and manufacturers alike, albeit in different ways. The main takeaway for the present is that it’s not a current crisis but a looming one. Plus, there’s no single, straightforward way to tackle it.

Thus, fleet owners who are interested in future electric vehicle investments should plan for the possibility of increasing their budgets to accommodate increased upfront costs. Relatedly, it’s wise for them to stay abreast of the manufacturers that have taken proactive steps to cope with a future battery shortage. Planning now should reduce the possible ramifications later.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.