According to Mike Dean, an automotive equity research analyst at Bloomberg Intelligence, the supply of lithium batteries for electric vehicle (EV) production could face a bottleneck starting in 2025.

The growing demand for EVs, fueled by consumer interest and government incentives, is expected to surpass the available capacity for battery production.

Dean highlighted that while semiconductor supply constraints are gradually easing, the next challenge will be meeting the demand for batteries.

Automakers and battery manufacturers are heavily investing in new battery plants, particularly in Europe and North America.
President Biden’s Inflation Reduction Act (IRA) in the US provides significant incentives for establishing battery plants, while the UK is also exploring its options.

Dean predicts a surge in the number of EV models from various brands in the next few years, which, coupled with these incentives, will strain battery production capacities from 2025 onwards.
Given the limited time until then, Dean questions whether the necessary infrastructure can be built in time to address the issue.

Additionally, the cost of lithium, a crucial component of batteries, has witnessed a significant increase, raising concerns about sufficient supply to meet the projected demand by 2024 or 2025, when automakers have ambitious EV sales targets.

To tackle these challenges, Dean emphasizes the need for greater vertical integration within the industry.
Some companies are opting for in-house production of EV components to mitigate supply chain issues.

In addition to inbound logistics problems, the surge in battery demand is expected to impact finished vehicle logistics in the latter half of this year, particularly for German automakers heavily reliant on the recovering Chinese market.
German carmakers, who have historically derived a third of their profits from the Chinese market, are facing hurdles in exporting EVs to China.

While local production of EVs in China is on the rise, German companies are lagging behind in terms of rolling out new EV models at a competitive pace.

This global trend is further exacerbated by the weight of EV batteries, which adds to logistical challenges.

Overall, the anticipated bottleneck in the lithium battery supply chain poses significant obstacles to the growing demand for EVs and highlights the urgency for proactive measures such as infrastructure development, vertical integration, and strategic planning to ensure a smooth transition to electric mobility.



Source: / Megan Kelly