OM in the News: Is the EV Supply Chain Ready?

The guts of EVs— batteries, electric motors and the electronics that mesh them together—are nothing like the engine blocks, transmissions and drive shafts that move today’s cars. “This industry is going through a transformation like it hasn’t seen since World War II. The whole supply structure is going to change,” says an industry expert.

On the upside, EVs require vastly fewer parts: An EV motor has only about 20 moving parts, compared with 200 in an internal combustion engine. Yet the industry is young, and finding reliable sources for EV parts is daunting.

Some pinch points: The batteries and most of the EV motors rely on unusual metals that can be costly and hard to obtain. The vehicles’ electronics require new chips from a semiconductor industry still working through pandemic-era backlogs. (EVs require more than twice as many chips as internal-combustion vehicles— 1,300 versus 600). Even the aluminum trays that hold batteries beneath the floors of electric vehicles can be scarce. There are supply chains within supply chains.

One of the biggest potential problems is finding sufficient and affordable supplies of key raw materials, including lithium, nickel, manganese and cobalt. Much of the mining and processing of these metals is based in just a few countries. Two-thirds of cobalt is mined in the Congo, where workers face dangerous conditions. Australia mines about half the lithium, while nickel is centered in Indonesia. The refining of these materials for use in batteries is even more concentrated: China processes 70% of the world’s lithium and cobalt, and 99% of the manganese.

Some car makers are already predicting battery shortages. “Put very simply, all the world’s battery cell production combined represents well under 10% of what we will need in 10 years,” says the CEO of Rivian Automotive. He added that “90% to 95% of the battery supply chain does not exist.”

Finally, the majority of motors used in today’s EVs rely on permanent magnets which require costly rare-earth metals. The dominant supplier is again China, and producing the metals can cause pollution and environmental damage.

Classroom discussion questions:

1. What positive supply chain issues does the EV industry expect?
2. What supply chain constraints are expected and how will they be addressed?