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Critical Minerals - Nothing Ventured, Nothing Gained

What it means for Australia’s clean energy ambitions

Today's automotive supply chain requires responsive transformation to support the global adoption of Electric Vehicles (EVs) and the lithium-ion batteries (LiBs) that power them – technologies that are critical to the energy transition. For our world to reach net zero by 2050, EVs must represent more than 60% of vehicles sold globally by 20301. EVs and LiBs present a materials-intensive, electrified alternative to the fuels-intensive Internal Combustion Engine (ICE). They are an alternative that is pragmatic, lower carbon and approaching cost-parity1. In the five years to 2022, EV sales have grown from around 1 million units per year to more than 10 million1, signalling a demand-driven paradigm shift for the world’s automotive original equipment manufacturers (OEMs) and their integrated supply networks. To continue supplying the EV industry, whole sectors, workforces and supply chains must change – catalysed by new EV-focused market entrants and timely government support. In a world of volatile market dynamics and heightened competition, supply solutions that illuminate complex supply problems, facilitate supply chain control, and draw upon a resilient supply of raw materials will serve as an enduring competitive advantage for EV market participants.

The production of LiBs presents a complex operational and supply challenge, requiring advanced materials engineering and chemical processing capability, bankrolled by significant capital to achieve economies of scale. LiBs are manufactured during the midstream of the EV supply chain. It is during this process that incremental improvements or component shortages influence downstream end-user applications (vehicle performance, range, durability), magnify upstream raw material demand and complicate pre-cursor processing. The production of a LiB is a concerted engineering, chemical, manufacturing and logistical undertaking. One such strategy to counter the risks of LiB production is vertical integration. An automotive OEM with a vertically integrated LiB supply network could benefit from visibility along a nascent supply chain, fostering an internal capability to respond to complex technical challenges, as and when they arise – a tangible advantage in the race for EV market share.

The acceleration of the automotive industry’s transition to EVs is increasing the criticality of existing battery raw material supply channels and driving volatile market dynamics. Sensitivity to raw material prices, changes in consumer preferences, evolving government incentives and advancements in battery technology, are examples of such market dynamics automotive OEMs must navigate within their EV sourcing strategies. Both increases in raw material prices and advancements in LFP (Lithium, Iron and Phosphate cathode) technology may explain the recent resurgence of battery chemistries with low or no nickel content1. As competitors convert to less energy-dense LFP tvariants and consumers respond to a greater selection of EV models, EV market leader Tesla continues to leverage long-term nickel supply contracts, equipping its high-end vehicle offerings with better-performing NCM (Nickel, Cobalt and Manganese cathode) batteries. Tesla’s use of an EV supply strategy that not only identifies supply shocks but facilitates supply chain control through vertical integration, could continue to generate perceptive supply strategies during periods of market volatility.

Automotive OEMs must prioritise solutions that foster the development of EV supply chain capability yet remain agile to respond to the rapid pace of innovation. In the early race to secure contested EV market share, it is not the big who eat the small, but the fast who eat the slow.

 We want to acknowledge the contribution of Amy Wang, Tony Wilson, Cooper Taylor, and Jason Goh in preparing this blog.

1. IEA, 2023

2. Global EV Outlook 2023