Those who have followed my articles for a while perhaps already know that I have a very special appreciation of the EU’s talents in long-term planning. In fact, if I was in a position to hand out awards, I’d hand one out to Brussels. I’d call it the Act Before You Think Excellence Award. But now I’ve found that the EU has a serious challenger to this award.
The EV industry is facing a massive battery shortage crisis, compared to which the chip shortage will look like “a small appetiser”. This is what the chief executive of Rivian told the Wall Street Journal in an interview this week.
“Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years,” RJ Scaringe told media last week, as quoted by the WSJ. “Meaning, 90% to 95% of the supply chain does not exist.”
I have to admit that when I read the second part of this quote I was dumbfounded for a whole minute. Or maybe it was even two minutes. I have zero academic knowledge of business management but I do own my business (employing my very best self) and I have come to the conclusion that in order for this business to survive, I need to plan for the long term. I need to prepare for various contingencies. And I need to anticipate the needs of my business in the future. How is it, then, that people at the helm of companies worth billions of dollars did not do the same thing?
Last year, Reuters did an analysis of the EV shift plans of global carmakers and calculated that the EV revolution will cost them some $515 billion. I wrote about that here. I would really like to know how the breakdown of this investment pot looks because if the bulk of this money is not going into building supply chains for raw materials, I don’t know what it is being used for, honestly.
“Car companies are trying to lock up limited supplies of raw materials such as cobalt, lithium and nickel that are key to battery making, and many are constructing their own battery plants to put more battery-powered models in showrooms,” the WSJ’s Sean McLain and Scott Patterson wrote in the report on Scaringe’s warning.
So, EV makers are building battery plants before securing the supply of raw materials to be processed in these plants. I have no other explanation of the current supply situation with critical metals and minerals. If supply had been secured, there would be no such shortage. But the shortage — or rather, shortages — are a fact and Tesla “might actually have to get into the mining & refining directly at scale,” as Elon Musk said earlier this month.
Might? It might have been a good idea to get into mining and refining directly at scale five years ago or even earlier. The fact that even Musk, hailed as an EV visionary, failed to see the looming shortages is worrying, especially since all the signs were there already. Underinvestment in new mining output is not news. It hasn’t been news for years. And yet somehow Musk, Diess, Barra and the rest of them seem to have thought there would be enough cobalt and lithium for their EV batteries as soon as Tesla, VW or GM need them.
VW is spending $100 billion on EVs over the next five years. The money will be spent on new factories at home and across Europe but also on setting up its own battery company, which — this is hilarious — is seen generating revenues of up to 30 billion euro, which is about $32 billion. In a world where 90-95% of the EV battery supply chain is non-existent.
Across the Atlantic, Ford recently updated its EV spending plan from $30 billion to $50 billion. I wondered why, briefly. Sadly, the revision had little to do with the prices of metals and minerals and a lot to do with bigger EV sales ambitions because the Biden administration is so supportive and it will be in power forever. Ford expects to make 2 million EVs in 2026, or a third of its total global output, rising to 50% by 2030.