Tag: batteries

OM in the News: The Robotics Supply Chain

The next 20 years are not just about making robots better, but also about how they will be used in all sorts of industries, from small tests to big factories. The real challenge is having specialized engineering skills, great manufacturing, and dominating software,  reports Industry Week (March 11, 2026). 

There are 6 key areas that make all the difference in this industry.  Here is a breakdown of the cost of the parts that go into a robot:

1. Actuators & Gearboxes (35-40%): The physical muscle.

2. Robot Structure / Manipulators (15-20%): The physical frame and integration.

3. Sensors & Perception (10-15%): The eyes and ears.

4. AI Compute / Control (10-15%): The operational brain.

5. Battery / Power Systems (10-15%): The energy storage for mobile units.

6. Precision Motion Components (5-10%): The components required for fine movements.

This list shows that a robotics breakthrough isn’t just software advances; it depends on physical components and the supply chains that produce them. But there are 3 chokepoints (bottlenecks).

 #1: Precision Reducers, controlled by Japan. Robots can’t move with a lot of power and precision without special parts (harmonic and cycloidal reducers). Two companies in Japan make 70% of these parts used all over the world. Spending more money won’t allow other companies to make these parts, because they need special knowledge about metals and years of experience making precise parts.

 #2: AI Compute (The Intelligence Standard), controlled by the  U.S. Today’s robots, especially those that use reinforcement learning, need powerful computers to work properly. NVIDIA’s CUDA system has become the leading platform used by robots that learn and think. Making a better chip is not enough if you can’t replace the software that all robotics engineers already use.

#3: Battery Supply Chain, controlled by China.  Robots are changing from big, stationary machines to mobile ones. This means batteries are now a crucial part of making them work. One company in China, CATL, controls 1/3 of the world’s battery market. China has a very strong grip on this supply chain.

The global map of robotics is specialized. There is a multi-polar supply chain that is difficult to disrupt:

USA: “The “Brain.” (software, autonomy, AI compute).

Japan: The “Hardware King.” (motors, gearboxes, precision engineering).

Germany: The “Precision Engineer.” ( mechanical systems, high-end production).

China: The “Scale & Power.” (manufacturing speed, massive infrastructure, battery supremacy).

Taiwan: The “Linear Specialist.” ( The linear guides and ball screws essential for motion).

Classroom discussion questions:

  1. Why must operations managers understand these costs and bottlenecks?
  2. What are the supply chain implications?

OM in the News: The U.S. Enters the Lithium Supply Chain

These days, companies in the south aren’t looking to find more oil—they are instead prospecting for lithium, a metal that is increasingly prized around the world as an essential ingredient in electric-vehicle batteries. “If the U.S. is to ease its dependence for lithium on other countries such as China, it may need Arkansas to lead the way,” writes The Wall Street Journal (July 21, 2023).

The lithium geologic band running through the South

Exxon Mobil, a new player in the hunt for U.S. lithium, is planning to build one of the world’s largest lithium processing facilities in  southern Arkansas, with a capacity to produce 75,000 to 100,000 metric tons of lithium a year. At that scale, it would equate to about 15% of all finished lithium produced globally. The prospect could have the equivalent of 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs.

To push the project forward, Exxon and two of its announced competitors will have to profitably scale up the technology used to siphon lithium from brine, which has been an elusive goal across the industry. This particular geologic region, called the Smackover Formation, runs from Texas to Florida. It is rich with saltwater brine, which once bedeviled companies drilling for oil. That brine also contains small amounts of lithium, and the companies are now optimistic they can scale up technologies to extract it. Drilling for lithium with this extraction method is cleaner than traditional mining, and faces fewer regulatory risks.

The mining is expensive, though, costing about $1.5 billion to build 25,000 metric tons of capacity. The three proposed projects would create 6,000 jobs– and require 1,600 trucks by 2028.

Exxon believes it can leverage its engineering prowess to become a low-cost domestic supplier of lithium, and has had discussions with battery and EV manufacturers. The company would also benefit from U.S. green-energy subsidies, which allows for tax credits of 10% of the cost of producing lithium. The firm, generally bullish about the future of oil and natural gas, is also preparing for a future less dependent on gasoline. Last year, Exxon projected demand for auto internal combustion engine fuels could peak by 2025, while EVs, hybrids and vehicles powered by fuel cells could grow to more than 50% of new car sales by 2050.

Classroom discussion questions:

  1. Why is lithium an important EV supply chain component?
  2. What is Exxon’s strategy?

OM in the News: The EV Battery Dilemma

Traffic backs up at the Bay Bridge. California is set to implement a plan to prohibit the sale of new gasoline-powered cars by 2035.

Recent U.S. regulations are pumping billions into battery manufacturing and incentives for EV purchases. The E.U., and several U.S. states, have passed bans on gas-powered vehicles starting in 2035. This transition will require lots and lots of batteries, reports Grand View Research (June, 2023).

When a lithium-ion battery, which consists of thousands of cells filled with cobalt, nickel and manganese, comes to the end of its life, its green benefits fade. If it ends up in a landfill, its cells can set afire or leach dangerous chemicals that can contaminate water supplies and ecosystems. The thin metal exterior of a battery will decompose within 100 years, exposing the toxic heavy metals inside, which will never decompose.

But recycling these batteries can be hazardous. If they are not opened carefully, they can explode, short-circuit, and let off toxic fumes.  In the coming decades, tens of millions of EV batteries will reach their end-of-life. (Some predict there will be 150 million EVs on the road by 2030. Last year there were fewer than 12 million). Current EV batteries “are really not designed to be recycled,” says one industry expert.

The E.U. and China are setting new rules for some level of battery reuse. But it will not be easy to meet the new regulations. Most recycling processes produce heavy waste and emit greenhouse gases, and very little recycling goes on today.  (Recycling rates in the E.U. and the U.S. are less than 5%). Most of the batteries that do get recycled undergo a high-temperature melting-and-extraction process. Those operations, which are carried out in large commercial facilities are energy intensive. The plants are also costly to build and operate, and require sophisticated equipment to treat harmful emissions generated by the process. And despite the high costs, these plants don’t recover all valuable battery materials.

Battery-swapping is one innovative business strategy proposed in OR/MS Today (June 20, 2023).  A battery swapping infrastructure station  network could provide a service for EV owners to “refuel” their vehicles. Replaced batteries would subsequently be recharged and exchanged for other arriving EVs needing a battery swap. One significant challenge impeding this concept was the need for a universal battery standard that multiple automakers could share. The battery packs needed to have identical dimensions and shapes to be compatible. Tesla tried the concept in 2013, but gave up on it a few years later.

Classroom discussion questions:

  1. Why is battery swapping so difficult?
  2. Why is recycling EV batteries so complex?

 

 

 

OM in the News: Electric Cars and the Climate

An EV charging at a shopping center in California

Replacing all gasoline-powered cars with electric vehicles won’t be enough to prevent the world from overheating, says a new U. of California report. “The report offers a look at the environmental and economic sacrifices needed to meet net-zero climate goals,” writes The Wall Street Journal (Feb. 13, 2023).

The study notes three problems:

Problem No. 1: Electric-vehicle batteries require loads of minerals such as lithium, cobalt and nickel, which must be extracted from the ground like fossil fuels. If today’s demand for EVs is projected to 2050, the lithium requirements of the US EV market alone would require triple the amount of lithium currently produced for the entire global market. Unlike fossil fuels, these minerals are mostly found in undeveloped areas that have abundant natural fauna and are often inhabited by indigenous people. Mining can be done safely, but in poor countries it often isn’t.

Problem No. 2: Mining requires huge amounts of energy and water, and the process of refining minerals requires even more. Mining accounts for 4% to 7% of global greenhouse-gas emissions. Auto makers have made a priority of manufacturing electric pick-up trucks and SUVs because drivers like them, but they require much bigger batteries and more minerals. More mining to make more EVs will increase CO2 emissions. It will also destroy tropical forests and deserts that currently suck CO2 out of the atmosphere, the report says.

Problem No. 3: Producing EVs is an energy- and emissions-intensive process with high levels of embodied carbon. Electrification of the US transportation system will massively increase the demand for electricity while the transition to a decarbonized electricity grid is still underway.

The report concludes that the auto sector’s “current dominant strategy,” which involves replacing gasoline-powered vehicles with EVs without decreasing car ownership and use, “is likely incompatible” with climate activists’ goal to keep the planet from warming by more than 1.5 degrees Celsius compared with preindustrial times. Instead, the report recommends government policies that promote walking, cycling and mass transit.

Classroom discussion questions:

  1. Comment on the report’s recommendations.
  2. What can overcome the three problems cited?

 

OM in the News: EV Plans Hinge on Made-in-America Batteries

Companies and the U.S. government are shelling out billions of dollars to establish a supply chain for batteries in North America, a manufacturing effort that is critical to the auto industry’s long-range plans to put more electric vehicles on the road.

Batteries are the most expensive component in an electric vehicle, accounting for about one-third of its cost, reports The Wall Street Journal (Feb. 7, 2023).

Lithium, produced at this site in Nevada, is among the minerals that are crucial battery components.

American electric-car makers traditionally haven’t assembled batteries themselves. They rely on a far-flung supply chain. The raw materials are mined primarily in countries such as Australia, China, Congo and Indonesia. Chemical processing, battery components and assembly are mostly done by Chinese companies.

A recently passed law provides incentives for North American-built batteries and penalizes car companies that source batteries abroad, is spurring a wave of new projects in the U.S.—from cell-making factories to new ventures to mine the raw materials.

The U.S. also announced awards totaling $2.8 billion to about 20 companies in more than 10 states to help expand domestic manufacturing of batteries for electric vehicles and the electrical grid. The money will go to projects that process lithium, graphite and other battery materials, manufacture components and demonstrate new approaches, such as producing components from recycled materials. The projects will specialize in building up the supply of particular materials and components, with a goal of lowering U.S. battery manufacturers’ reliance on foreign supply chains.

Assembling the battery cells that are embedded in vehicles is only one part of a process that typically involves multiple companies and can be geographically dispersed across continents. In the first step, mining companies extract raw materials such as lithium, nickel and other minerals, which have risen in value as demand for green energy grows. Then, other companies—often in other countries—process the minerals. Next, other specialized companies build components such as anodes, cathodes, separators and electrolytes. A fourth step involves the production of battery cells that house the components, including electronics and sensors that help manage a battery. These specialized companies that make components such as anodes and cathodes are crucial to the industry’s growth in the U.S.

Classroom discussion questions:

  1. Why is the transition to U.S. production of batteries slow and expensive?
  2. Why does the E.U. oppose “made in the U.S. ” battery limitations?

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

“The car industry is staging a revolution,” writes The Wall Street Journal (Nov. 14, 2022)—a transition from the gas engines that have powered vehicles to a battery-propelled future.  But a key part of the reinvention remains unfinished and filled with risk: the supply chains for the parts needed to assemble electric vehicles.

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?

OM in the News: The Great Hummer Shortage

Remember about 20 years back, when the humongous General Motors Hummer was the king of the road? That triumph in automotive marketing died quickly when gas skyrocketed and the Hummer became an unofficial persona non grata of gas guzzling vehicles. But wait, it’s back! And this time the $85,000-$110,000 Hummer is an EV and the wait list just topped 77,000 perspective customers.

GM’s renovated Detroit factory, where about 700 workers build the Hummer, has been producing only around a dozen of the trucks a day, writes The Wall Street Journal (June 30, 2022). That is a 17.5 year wait and an unusually slow pace for a vehicle in production for more than 6 months. The Hummer trails rival offerings from Ford and Rivian Automotive.

Hummer production at GM’s Factory Zero, which underwent a $2.2 billion overhaul to build electric trucks, has been slower than normal in part because the truck was developed from scratch using a new electric-vehicle platform. “Our ability to satisfy that demand is only going to improve as we bring on vertical integration of battery cell production,” says a GM exec.

Auto makers are pushing to get electrics to market while also grappling with a computer-chip shortage and other supply-chain constraints (such as batteries) that have curbed vehicle output and sales. The Hummer EV’s battery pack is heavier than the overall weight of a Honda Civic, and is 1/3 of the vehicle’s weight.

Compared to the Hummer, Ford is making about 150 of its F-150 Lightning electric pickups per day at the company’s factory in nearby Dearborn, Mich. In the coming months, GM expects to fulfill deliveries at a much faster pace, particularly after it switches from using outsourced LG battery cells. It aims to start manufacturing its own battery cells later this summer in its new factory in Ohio. The company has been building multiple battery factories in the US over the past year, including one in Tennessee and another in Michigan in addition to its Ohio plant, as part of its efforts to achieve its goal of making more than a million EVs in the US every year by the end of 2025.

Classroom discussion questions:

  1. What are the main supply chain issues facing Hummer?
  2. Why is production so low?

OM in the News: “The ICE Age is Coming to an End”

Yes, that’s the quote in The Wall Street Journal (Feb. 6-7, 2021). But its not what you might think. It refers to the internal combustion engine, which over 100 years has been engineered to near perfection. The innovation of the battery-powered electric vehicle, by contrast, has barely begun. Still, car experts believe battery-powered models—which are mechanically much simpler than those with gasoline engines—will prevail. Batteries recently scored a win at GM, which is phasing out gas powered vehicles by 2035.

The rise of rechargeable batteries is now a matter of national security and industrial policy. Control of the minerals and manufacturing processes needed to make lithium-ion batteries is the 21st-century version of oil security. The flow of batteries is currently dominated by Asian countries and companies. Nearly 65% of lithium-ion batteries come from China. By comparison, no single country produces more than 20% of global crude oil output.

Assembling lithium-ion batteries in Huaibei, China

To meet expected demand, global output of lithium, a metal also used to make nuclear bombs and treat bipolar disorder, has tripled in the past decade. Lithium is mostly mined in Australia and Chile. EV battery packs and motors currently cost about $4,000 more to manufacture than a comparable fossil fuel-burning engine. But by 2022, the difference will be $1,900—and will disappear by 2025. VW, Tesla, and GM are pushing battery prices down further as they race to lock up the giant capacity needed to power millions of EVs.

 Last year, the U.S. established a consortium of agencies to promote a domestic battery industry, and used the Defense Production Act to speed development of mines for rare-earth elements. The U.S. Energy Secretary just stated, “We can buy electric car batteries from Asia or we can make them in America.” The E.U. is also using industrial policy to foster the development of a regional battery sector, saying it wants a “closed value chain for battery cells to be created in Europe” from processing raw materials through recycling used batteries.

Classroom discussion questions:

  1. About 4% of car sales last year were EVs. Why was that figure so small and why might it change?
  2. Why is the supply chain strategically important? (See Ch.11 in your Heizer/Render/Munson text)

OM in the News: The U.S. Needs to Make More Batteries for EVs

The auto industry’s quickening shift to electric cars is spurring investment in another emerging industry in the U.S.: manufacturing lithium-ion batteries for those vehicles, reports The Wall Street Journal (Jan, 27, 2021). China currently dominates the market for producing electric-vehicle batteries. But as auto makers spend billions to build more plug-in models in the U.S., several companies are looking to expand the supply chain for batteries and related materials in North America—a region that has long relied on imported components.

The U.S. needs to reduce its reliance on China if it wants to lower costs and remain competitive in making EVs and their batteries domestically. U.S. battery-making capacity is expected to increase sharply over the next decade, rising more than sixfold from 60 gigawatt hours of annualized production in 2020 to about 383 gigawatt hours in 2030.

Miniature lithium-ion battery cells at Sila

Battery-manufacturing giants such as South Korea’s LG Chem and SK Innovation are building big factories in the U.S. to expand American production of electric-car batteries. LG Chem is building its factory in Ohio as part of a joint venture with GM. Tesla is also expanding its battery-making capabilities, seeking to cut costs and shorten its supply chain by making some materials in-house. N. American firms Sila Nanotechnologies, Romeo Power, and  Lithium Americas are planning U.S. factories as well.

China makes more than 70% of the world’s lithium-ion batteries. It also refines and manufactures the majority of minerals and materials needed for those batteries. Moving more battery production to the U.S. will help car companies and their suppliers bring down costs, a step that is important for consumers to adopt EVs more widely.

Classroom discussion questions:

  1. What are the critical components of these batteries, and does the U.S. have a supply of them?
  2. What is the danger of opening a large number of battery manufacturers?

Guest Post: Learning Curves, Batteries and Product Life Cycles

Our Guest Post comes from Prof. Howard Weiss, the developer of Excel OM and POM.  These 2 software packages (that we provide for free) have helped our books become number 1 in U.S. and global markets.

In the figure below, you can see that a 1 kWh lithium-ion battery that cost over $1,100 in 2010 now costs less than $160. Batteries are critical especially as more and more car models are electric or hybrid.

Module E in your Heizer/Render/Munson textbook explains: “… if the learning curve is an 80% rate, the second unit takes 80% of the time of the first unit, the 4th unit takes 80% of the time of the 2nd unit, the 8th unit takes 80% of the time of the 4th unit, and so forth.” Learning curve unit times or costs are based on the volume doubling.

The formula for the time or cost of the Nth unit is TN = T1(Nb)

where TN is the time/cost for the Nth unit and b = (log of the learning rate)/ (log 2)

Using Excel’s Goal Seek we determine that to have the cost reduced from $1160 to $153 would require production in 2019 to be 1183 times the number of units produced in 2010. The steep increase in volume agrees with the introduction stage of product life cycles displayed in text Figure 5.2 (see p. 164).

Classroom discussion questions:
1. What products have had their costs decline as steeply as the batteries in this article?
2. What is the current stage in the product life cycle of Zoom?

OM in the News: The Secret to Affordable Electric Cars?

Melting down batteries for recycling is difficult and sometimes hazardous work.

The cost of batteries has long been the biggest obstacle to making electric cars affordable for the masses, reports The Wall Street Journal (Aug. 29-30, 2020). As a result, electric vehicles still carry a hefty $12,000 average price premium compared with gas engine cars.

Since 50% to 75% of the cost of a battery for the industry now lies with its raw material, Redwood Materials, in Carson City, Nevada, sees potential for recycling to lower costs. Almost every day old iPhones and other used personal electronics arrive by the truckload at Redwood, where workers crack them open, pull out their batteries and strip them for raw materials. The firm believes refuse holds the key to driving the electric car revolution forward—and making the vehicles affordable enough for everyone to own one. (Another source is the supply of used EV batteries, which is exploding. Half-a-million EVs are expected to be scrapped in 2025).

For most battery manufacturers, where to find all the nickel, cobalt and lithium needed to make the batteries that power Tesla’s cars and their growing list of rivals is the number one problem. Extracting those materials from nature, through mining and other processes, is costly and difficult, and production is lagging far behind expected demand.

Redwood Materials’ tack is to quietly build the biggest car battery-recycling operation in the U.S., betting that it can perfect a fast and efficient way of collecting and repurposing those materials to disrupt the centuries-old mining industry. “Forever, the entire market has been dictated by the commodity price of these metals,” said Redwood’s CEO. “It is work that is essential if the industry is going to continue to increase production of electric cars at the pace companies are planning.”

Classroom discussion questions:

  1. When federal subsidies end, will demand for EVs remain high?
  2. What are the advantages and disadvantages of recycling vs. mining for raw materials?

OM in the News: The Key to Electric Cars is Batteries–And There Aren’t Enough of Them

GM and South Korea’s LG Chem plan to build a $2.3 billion battery factory in Ohio, the latest example of an auto maker plowing money into the development of electric cars. The new plant would be among the world’s biggest producing battery cells for electric cars, rivaling Tesla’s Gigafactory in the Nevada desert, reports The Wall Street Journal (Dec. 7, 2019). Auto makers have been joining forces with battery makers as they gear up to spend about $225 billion to develop new electric-vehicle models over the next several years. (GM plans to introduce at least 20 electric models globally by 2023).

GM said the new battery plant, which would employ more than 1,100 workers, would have a capacity to manufacture enough batteries annually to produce more than 30 gigawatt hours. (Tesla’s plant has output of about 24 gigawatt hours). GM and LG Chem will co-develop and assemble battery cells to be used in the auto maker’s electric vehicles, including a battery-powered truck GM plans to introduce in  2021. GM said the joint venture with LG will speed GM’s electric-vehicle development and reduce costs. Toyota, for example, is finding it hard to build enough batteries to keep up with rising demand for hybrids, which use a combination of gasoline and battery power. “We can assemble the cars,” said one Toyota exec.  “The assembly is not the bottleneck. It’s the battery itself.”

Auto union officials have expressed concern that the expansion of electric vehicles poses a long-term threat to auto-factory employment, because they require less manpower to produce than gasoline-powered cars. Battery-cell plants are highly automated and require different skills than those needed at traditional car factories. The plants’ employees include test technicians, computer programmers and equipment engineers.

Classroom discussion questions:

  1. Why is there a battery bottleneck?
  2.  Prepare a SWOT analysis of GM’s strategy.

OM in the News: Tesla Needs Its Battery Maker, But a Culture Clash Threatens

A Tesla Model S being fitted with a battery pack

In 2008, Tesla began delivering its first EV and wanted a partner capable of manufacturing lithium-ion batteries on a mass scale. But years after committing to invest billions of dollars in a shared battery factory in the Nevada desert, Panasonic has a strained relationship with Tesla. The Gigafactory was supposed to boost profits, cement Panasonic’s future in automotive electronics and give Tesla easy access to the most important—and expensive—component of its vehicles. “Instead,” writes The Wall Street Journal (Oct. 8, 2019), “the partnership has exposed a culture clash between the conservative, century-old Japanese conglomerate  and the 16-year-old Silicon Valley upstart built around Mr. Musk’s vision for upending 100 years of automotive tradition”.

Musk has pushed Panasonic to cut what it charges for the battery cells as Tesla builds another costly factory in China. Panasonic has resisted the pricing requests, and is hesitant to go into China with Tesla. Production has fallen behind schedule, and the race to catch up has thrown the Panasonic battery unit deeper into the red. Tesla, for its part, needs the Gigafactory to continuously improve efficiency and reduce manufacturing costs so it can lower its car prices, which it sees as critical to mainstream success.

An early source of tension was missed deadlines. Panasonic would rush to supply Tesla’s production targets only to find the auto maker behind schedule. Tesla unveiled the Model 3 to overwhelming interest, leading Musk to try to speed up production plans. In 2016, he promised the plant needed to make enough batteries for 500,000 vehicles by 2018—2 years ahead of the original plan. That meant the battery factory had to speed up plans in a round-the-clock operation. In April, 2019 Musk blasted Panasonic, saying it was operating at a pace that constrained Model 3 production, even though it appears Tesla will sell only 400,000 EVs this year.

Classroom discussion questions:

  1. Unhappy with the price of batteries Panasonic supplied for the Model S, Tesla made plans to build its own. But after a few months the plan was scrapped. Why do you think this happened?
  2.  Describe the relationship between these 2 companies.

OM in the News: A New European Supply Chain–Electric Batteries

The battle between Europe and China over control of the technology that powers electric cars has just begun, reports The Wall Street Journal (Sept. 15, 2019).

“The Chinese can build an entire factory in 10 weeks,” said the CEO of Sweden’s Northvolt AB, which aims to become the prime purveyor of batteries to Europe’s makers of electric and hybrid cars. Northvolt is launching into a market that has been locked up for years by South Korea giants  LG, Samsung. and SK Innovation. His hope is that Europe can retain its expertise as car production shifts from mechanical engineering—where the region has excelled—to batteries.

VW alone expects to build at least 2 million electric cars a year by 2025. (VW just agreed to invest $994 million Northvolt.) Non-European players, such as China’s CATL are muscling in. CATL plans to construct a $2 billion battery plant in Germany. LG Chem is building a second plant in Poland, while SK Innovation is building its second Hungarian plant.

But European auto makers and politicians are eager to develop a regional supply chain mirroring the one that exists for conventional automobiles. This is something of a U-turn for car companies that long considered batteries a commodity not worth producing in Europe. Daimler ended battery cell production in 2015, saying it was too costly. But when these manufacturers recently began ramping up their EV plans, they struggled to secure sufficient raw materials and battery capacity, and realized they had to invest in battery production. Still, the cost of investing in battery development and production from the ground up is proving too steep for even large suppliers, such as Bosch.

The shift to EVs could have a huge impact on an industry that employs 13.8 million workers in Europe. Germany estimates it could destroy 13% of the country’s automotive jobs.

Classroom discussion questions:
1. How will EVs impact current auto supply chains?

2. Are U.S. auto makers facing the same challenge?

 

OM in the News: Everything You Should Know About Lithium

Lithium is neither cheap nor easy to mine at this Nevada site

Lithium: “a metal crucial to what bankers, regulators, and clean-energy advocates see as the imminent transformation of the transportation sector and the electric grid,” writes Businessweek (April 3-9, 2017).

The lightest metal on the periodic table of the elements and a superb conductor, it’s what gives the lithium ion batteries in our cell phones, laptops, Priuses, and Teslas the ability to recharge more times, last longer, and provide more energy per weight or volume than other battery chemistries. (The lithium in a Tesla costs around $500). It’s also what makes devices explode if their battery-management systems aren’t working properly, as in many hoverboards or Samsung’s Galaxy Note 7.

How is lithium changing transportation? Chinese battery and auto manufacturer BYD just build its first American bus factory near LA. The buses are lithium-intensive; each uses about 8 times as much as an average electric vehicle, which in turn uses about 10,000 times as much as an iPhone. The vehicles are more expensive than ones that run on diesel or natural gas, but only initially. After 3 to 5 years, customers save $50,000 to $75,000 per year per bus on fuel and maintenance.

In Shenzhen, 20 miles north of Hong Kong, thousands of electric buses draw wind power from the grid overnight, when residential and business customers aren’t using it, and then disperse it during the day as they drive around the city. A shift toward electric vehicles is under way in Europe, as well. BMW and Daimler have each invested hundreds of millions of dollars in electrifying their fleets, moves that help drive the European Union’s policies. And China’s broader electric auto market will soon dwarf them all. Although electric vehicle adoption has been slower in the U.S. than expected, the price of battery packs has been dropping fast, to the point that electric cars are poised to become cost-competitive with gas-powered vehicles.

Classroom discussion questions:

  1. Why is lithium so important in manufacturing?
  2. Lithium prices have increased from $4,000 per metric ton in 2014 to $20,000 today. Why?