Can the US Supply Chain Handle Growing EV Demand?

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By Adhish Luitel | 4Q 2022 | IN-6779

Electric Vehicle (EV) sales have been growing rampantly in the US and across the world, putting a strain on EV supply chains. Strategic supply chain moves recently undertaken by regulators and major EV players will shape this industry in the coming years.

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Biden Announces $2.8 Billion for Battery Supply Chain


President of the US, Joe Biden, recently announced US$2.8 billion in grants to boost the Electric Vehicle (EV) battery supply chain. This grant will go towards funding projects to produce things like battery-grade lithium, graphite nickel, and binding material in an effort to break the US away from its dependence on foreign suppliers. The Biden administration has bet big on EVs: from funding the bipartisan infrastructure law and semiconductor bills to a historic investment in clean energy in the Democrats-only climate law, the Biden administration set a goal to make electric vehicles half of all new vehicles sold by 2030.

Supply Chain Issues Persist


Despite efforts from the Biden administration, Electric Vehicles remain expensive and out of reach for many prospective consumers. A vehicle valuation company, Kelley Blue Book, reported the average price of a new EV last month was US$65,291, aligning within the luxury vehicle price range. Biden said the demand for critical battery materials "is set to skyrocket by four to six hundred percent", which could further raise the prices up, proving the Biden administration’s efforts ineffective.

Despite cost concerns, sales of EVs have begun to rise dramatically. General Motors (GM) said they expect EV profits to be comparable to gas vehicles by 2025, years ahead of schedule. Meanwhile, sales of Ford’s electric vehicles continue gaining momentum, up 102.6% Year-over-Year (YoY). Ford’s EV sales for the month of November were higher than its gas vehicles. When it comes to the overall EV market, the total EV sales are expected to grow from just under 10% of new passenger vehicle sales in 2021 to 23% by 2025. This has led to a dramatic rise in the demand for one of the most imperative components of EV batteries: lithium. The global demand for lithium carbonate was 500,000 metric tons in 2021. This number is set to grow up to three to four million metric tons by 2030. The apparent problem with the demand is a reliance on countries mining minerals.

The growing movement of electrification of commercial fleets has also largely contributed to the demand for more EVs. Many large commercial fleets have started investing heavily and are raising considerations toward full fleet electrification in the near future. Although federal incentives have been a primary driver, factors such as lower operational costs, simplified maintenance, and enhanced performance are other prominent advantages EVs have over regular internal combustion engine vehicles. IKEA US has converted all of their last-mile fleet in the state of New York to EVs. Amazon, meanwhile, is planning to invest over €1 billion in EVs for their Europe fleet and has partnered with EV manufacturer Rivian in the US. Domino’s Pizza has said they’ll be rolling out a fleet of 2023 Chevy Bolt EVs across the US in the coming months, as it looks to not only reduce its environmental impact but also attract new delivery drivers.

Reshoring Will Be Key


Reshoring and any other efforts to bring production closer to the end market can largely help with these intertwined supply chains. The Biden administration noted how the United States is currently dependent on foreign suppliers for battery materials, with China controlling most of the output. The Department of Energy has funded some key projects this year to aid in this:

  • A sedimentary deposit in Nevada will be used to devise new processes to extract and refine lithium through the American Battery Technology Company, which hasn’t yet to be done at a wider level; most battery-grade lithium comes from outside the country.
  • Ascend Elements has an initiative to construct a Cathode Active Materials (CAM) plant at a greenfield site in Hopkinsville, Kentucky.
  • Albemarle has an initiative to construct a new, commercial-scale US-based lithium materials processing plant at Kings Mountain, North Carolina.
  • Cirba Solutions’ existing lithium-ion recycling facility in Lancaster, Ohio will be expanded and upgradd to produce more lithium.
  • Anovion has an initiative to expand its Sanborn, New York manufacturing into Alabama with a new graphite manufacturing facility.

Similarly, large automotive manufacturers have taken key steps in reshoring efforts as well. GM and LG Energy Solution will spend an additional US$275 million in their joint venture battery plant in Tennessee to increase production by more than 40%. The new investment is in addition to the US$2.3 billion announced in April 2021 to build the 2.8 million-square-foot facility. Initiatives similar to the ones taken by GM and the Department of Energy, coupled with federal incentives under the Biden administration’s Inflation Reduction Act, will play a key role in streamlining US’ EV supply chain hurdles in the coming years.