What Makes Electric Vehicles Work: The Global Materials Supply Chain

[Brief starting note: I apologize for the general lack of visuals in this post! I strongly recommend a very recent report by the International Energy Agency, the IEA, on this topic. It contains lots of excellent graphs that I can't reproduce, and is refreshingly written in readable form. You can find it here: (https://www.iea.org/reports/global-supply-chains-of-ev batteries)]

"EV today is mostly an affordability problem, he said. "It's not about technology." That's the view of Carlos Tavares, the CEO of Stellantis, one of the world's largest carmakers (it includes Renault, Jeep and Fiat Chrysler). One of the most common complaints I hear from people about the electric vehicle transition is that EVs are "simply too expensive." And it's completely justified! As of late 2022, the average EV in the U.S. costs about $65,000, or the same as the average luxury gas car (while the average gas car price is almost $50,000- in itself recently increasing). Also- a larger proportion of current EV models are luxury models. Given that, why (outside of China- see my previous post) are EVs in general so expensive?? That's a really pressing issue for all of the world's carmakers, as they rush, either by their own deadlines or those set by governments or both, to carry out the enormously expensive EV transition. The carmakers, with few exceptions, have bet on EVs as the future of the industry. As far more EV models than ever before are coming out in the next few years, there's a real risk that companies could leave most of the world's car-buying public behind, simply by the prices they charge.

The heart of the answer about the cost difference lies in the cost of materials. In the case of full-electric vehicles, there really are surprisingly few critical materials! When I say "critical," I am leaving aside the parts of passenger cars that electric and gas cars have in common (frame, windows, axles, etc.). Compared to the long list of parts in internal combustion engines, EVs have very few components. There are only three major ones: batteries; semiconductors (the chips that regulate the motor and provide the functions of a wide variety of electronic systems, as they do in many gas cars); and magnets (which add a very powerful spin to the wires within the motors, greatly increasing their energy output). While they don't play as big a role in adding to the cost as these three, it's also true (and not generally noted) that EVs, with their greater weight and other different design characteristics, require specialized (and more expensive) tires. In this post, I will focus on two of the "Big Three" components, the batteries and the magnets (leaving the semiconductors aside in the interest of space, though their scarcity in 2021-2022 has added significantly to all car prices- gas as well).

So now I've focused down to only two issues: the price of batteries and the price of magnets. Batteries first (after all, they are the power source!). Also- batteries in themselves represent about a third of the total cost of an average EV. Again, there are surprisingly few battery types to consider, indeed only three in use: all lithium-ion batteries. The dominant one is lithium nickel manganese cobalt oxide (or NMCs). Less common, but recently growing in use, has been the lithium iron phosphate type (LFPs). The only other one is the lithium nickel cobalt aluminum oxide (or NCA) type, only used by Tesla.

As the names themselves indicate, each battery type is made up of a handful of so-called "critical minerals". Those minerals, both individually and in concert, have the necessary chemical characteristics, including the all-important energy density, that gives EVs the power to rival the power stored in fossil fuels (gasoline and diesel, which when combusted release such big quantities of greenhouse gases).

The battery names all have one mineral listed first: lithium. It's a "wonder mineral," the lightest natural metal, with a capacity to release, even in small quantities, an amazing amount of energy. You'll find it referred to as "white gold" or "white oil," as one of the most important materials of the 21st century! While alternative chemistries are being explored, right now almost all EVs rely on lithium as essential for their batteries! As stated, battery costs are at least a third of the overall cost. Combined with the fact that, on average, each EV uses about 20 pounds (or 9 kilos), and that there is now such intense competition for it, the (rising) price of lithium is a major part of the car's cost.

That price increased 123%, just from Nov. 2021 to Nov. 2022! That's the first steep rise in lithium prices in recent years, and in turn explains the first big rise of battery costs since the transition began. What I'll do next is to "swim upstream," like the proverbial salmon, in the lithium supply chain- from the carmakers to the battery makers, from them to the refiners, and from the refiners to the lithium mines, to explain how this "lithium rush" is unfolding. For this research, I've read far more business sources than, as a former history teacher, I've ever done before ("Financial Times," "Bloomberg,", "Forbes", mining sites, etc.)! But the story of lithium (and of all the other critical minerals) is not just an economic one; it very much spills over into global international relations, and into one dynamic in particular: China, versus the rest of the world.

That's because, when one looks at the entire lithium supply chain, China is dominant at every level, and that in turn helps explain why China is so much farther along in the EV transition than other large nations (a story also covered in my last post). To start with, the largest EV battery maker is Chinese: CATL (mercifully short for the full name, Contemporary Amperex Technology, Limited). Over a third, or about 35% of all EV batteries are being made by CATL, and in turn it supplies most of the world's major carmakers. That's a pretty stunning figure, given that the EV transition is one of the biggest economic, and social, transformations in modern world history. So- how did CATL (and the Chinese) get such a commanding role??

That story starts with one I briefly covered in the last post: the decision by the Chinese government to embrace and heavily subsidize the EV transition, all the way back in 2007-2009, as part of its overall strategy to catch up to and surpass Western nations in technologies (with the additional benefit of reducing some of the world's worst air pollution, partly due to car emissions). As part of that strategy, Chinese consumers got tax breaks if they bought EVs, but only if the batteries inside were made in China! The first company to benefit was BYD (mentioned last time as Tesla's most important EV carmaking rival). BYD chose to go with LFP batteries, which are significantly cheaper. As for CATL, it was founded by Zeng Yuqun (who now goes by "Robin Zeng"), in 2014. He became the "Battery King,", one of the first "lithium billionaires," by embracing NMC batteries: more expensive, but a chemistry that delivers much more energy density, and therefore significantly greater driving ranges, with an obvious appeal to consumers. And he did so just as China became the world's largest motor vehicle market. CATL, based in the southeastern coastal city of Ningde, is now worth more than Ford and GM combined! It can pretty much dictate its contract terms to carmakers, and Zeng is now in the top 30 of "Forbes"' list of the world's richest people. CATL and BYD (11%) together now make over half of the world's EV batteries. CATL is now aggressively moving into the big European car market, both by setting up a major base in the city of Debrecen in Hungary (attracting the major German carmakers), and now building a factory in Germany itself. It has now bought its own lithium mine (in Bolivia).

So which companies, besides CATL and BYD, are the remaining major battery makers? I'll only mention the three that, combined, make about 40% of the remainder: LG (15.9%- South Korean); Panasonic (Japanese- 9.9%- in a long-term partnership with Tesla); and SK On (6.6%- also South Korean). Of the world's top 10 EV battery makers, all are in East Asia! Batteries are now being produced in "gigafactories," following Tesla's early Nevada example. The Inflation Reduction Act passed in the U.S. in Aug. 2022 provides billions in subsidies for EV manufacturing (and a tax credit for EV buyers), but also requires that 80% of the components be made in North America (with the clear goal of competing with China). As a result, there's now an extraordinary rush to build such gigafactories in America (especially in the Midwest and South, a veritable "Battery Belt" from Michigan down to Georgia). It's being led by GM (with its new Ultium battery design) and Ford (building "Blue Oval City" outside of Memphis). But foreign battery makers are now coming to the U.S. as well, and plants are starting to spread across Europe (LG now has the largest plant there, in Poland).

Now- on to the next step- who supplies the refined lithium to the battery makers? Such lithium comes in two forms: lithium hydroxide (the preferred type) and lithium carbonate. While lithium overall is not a scarce mineral, globally it is rarely found in concentrations high enough to mine profitably. Processing it is complex and very energy-intensive. Again the answer for dominance is: China, which by itself does 80% for the world (though producing only 13% of the lithium). Once again Chinese companies, with government assistance in building the refineries, found lithium sources around the world early enough to rule the industry (as they also do for the other critical mineral- cobalt, nickel, and rare earths). But there is one exception: the world's largest refiner (and lithium producer) is American: Albemarle, based in Charlotte, NC- right in my backyard!

Now- on to the origin story- where is the world getting its lithium?

There are two answers, very different from each other (in geography and process): brine and hard rock. The first involves draining the lithium-salt solution at the bottom of desert salt lakes into pits, where it is mixed with huge volumes of water, and then evaporated by the sun. The brine process is the one used in the so-called "Lithium Triangle" (the area at the intersection between Bolivia, Chile and Argentina), and in the U.S.'s sole current working mine (at Silver Peak in Nevada). Chile in particular is the world's 2nd largest global producer (production in Argentina and Bolivia is, for the moment, far less). The good side of the brine process is the minimal cost and technology in the initial phase. The downsides are three: 1) harsh conditions (in Chile's case the lithium is found in one of the world driest places, the Atacama Desert); and 2) the long timeframe (it can take a year for the evaporation, plus filtration and other chemical processes, to produce the lithium carbonate). But the greatest negative of all is how much water is involved! It takes 418,000 gallons to produce 1 ton of lithium- and all of this water (since this method takes place in deserts) is groundwater, pumped to the surface, and ultimately all lost to evaporation! The processing involves harsh chemicals, and the ground surface is ultimately littered with piles of toxic salts. The environmental damage, for both wildlife and human inhabitants, is obviously very great (all groundwater resources, but especially those in deserts, take millennia to replenish!). For example, a biologist has documented a drop in the population of local flamingos. Two major companies claim that they have the answer, in a technique called Direct Lithium Extraction (DLE), one which concentrates the brine without evaporation, but it is not yet proven to work on a large scale. The second potential brine site in the U.S., Thacker Pass (also in Nevada), has so far been blocked by a lawsuit brought by local indigenous tribes (who regard the site as sacred).

The other lithium source, hard rock, involves a mineral called spodumene. This is a much more familiar technique, similar to all metals, in which the source rock is blasted out (creating large pits), and then the rock is ground and roasted to isolate the spodumene. Australia, which has the largest deposits (especially in its sparsely populated far west), has become the world's largest lithium producer through this method. The upside in this case is that the lithium is at a higher concentration; the downsides are that creating the suitable concentrate for batteries involves a lot of energy and use of sulfuric acid, and miners also have to dispose of the slag left behind. But hard rock lithium mining does seem to be the major source in the near future. There's a frantic rush going on all over the world to find rock with spodumene, and, given the high price of lithium, to start the blasting and processing quickly. Countries being explored include Portugal, Finland, Canada, Zimbabwe, and, in the case of the U.S., one site in North Carolina (which has a closed mine; reopening has been opposed by neighbors, and it has not yet received a permit). Ukraine has lithium deposits too, but of course it's now a battlefield. The reality is that mining lithium, like mining in general, is inherently destructive and disruptive. There's also a lot of debate about whether there will even be enough commercially available lithium, at least in the near future, to power the millions of EVs expected in the next decade. But, until a fully satisfactory alternative to lithium can be found for EV batteries, the rush must go on. No lithium, no transition!

And lithium is not the most controversial battery material by any means. That dubious honor belongs to cobalt. Cobalt (in its natural state a hard silver metal) has been used for millennia as a blue pigment to color glass and ceramics, but in this case it's added to batteries to provide stability. Lithium-ion batteries, of all types, have some risk of runaway fires (most commonly when the battery packs are violently torn apart, as in an accident). Cobalt drastically reduces battery overheating and the risk of fire, and also extends battery life (nowadays typically to 8-10 years). It's found usually in the process of mining for much more common resources (nickel and copper), and is the most expensive battery material. A typical EV contains 20-30 pounds! The problem is that the biggest producer, by far (70%), the very poor Democratic Republic (DRC), the 2nd largest country in Africa. The DRC, blessed with some of the greatest mineral riches in the world, was brutally exploited as a Belgian colony from 1908-1960, and has suffered from instability, grinding poverty, and violence since independence.

As the new use of cobalt became apparent in the 1990s with the development of lithium-ion batteries, two major contenders have moved into the DRC. One is Glencore, the Swiss company that is the world's largest commodity trader. But most of the mining has been done, or financed, by Chinese companies, who have controlled 15 of the DRC's 19 cobalt mines (centered on the city of Kolwezi). Collectively they have invested billions over a decade, in a conscious strategy to control the bulk of the global cobalt for the mushrooming Chinese EV industry. But very recently Glencore and the Chinese have come in for a great deal of negative publicity: for bribery (Glencore has just paid a large fine); for failing to live up to contracts (the Chinese promised to build roads and schools); and for not being at all interested in the ethics of how the cobalt is extracted. The backlash really began in 2016 with reports by Amnesty International and others about the so-called "artisanal" miners (desperately poor men, and even children, scratching out countless holes and selling cobalt to the companies for tiny sums). In Mar. 2022, a Congolese court stripped China Molybdenum of the 2nd largest mine, and it's looking very likely that in the near future the DRC will take control of its unique and priceless resource.

Caption: A miner ties up bags of cobalt inside the Congo DongFang mine in Kasulo. Image by Sebastian Meyer. Democratic Republic of the Congo, 2018. From pulitzercenter.org.

Another consequence of cobalt's bad human rights reputation (along with its high price) is that battery makers have been trying, as much as possible, to reduce or eliminate cobalt as a component.

There is another, and much less exotic, material in EV batteries: nickel. While the most important use of this metal today is in the making of stainless steel (batteries only make up about 7% of the use), there is a LOT of nickel in the batteries- between 5 to 7 times the amount of lithium! A Tesla contains about 110 pounds of nickel (50 kilos), whereas the lithium is only 2% of the batteries; the percentage of nickel used has also been increasing. More specifically, batteries need nickel sulfate, which is best made (unfortunately for the transition) from the high-purity (and scarce) Class I nickel. Sulfate can also be made from the far more abundant Class II source (which is found for example in the red clay laterite soil of the tropics), but only by an energy-intensive process that, in taking out impurities, generates far more carbon emissions that the use of Class I. Nickel sulfate is a key component of battery cathodes (the part that contains the electron-emitting lithium). Good Class I sources have so far been found only in Russia, Canada, and Australia, while the dominant Class II source (by far) is Indonesia. Once again, processing of the nickel is largely in the hands of a few companies (9 of them produce about 50%), and two are (surprise!) Chinese. The rest are based in Australia, the Philippines, Brazil, Russia, and Switzerland (Glencore). China again is the top nickel producer, while Russia is the top for Class I.

A fascinating connection to mention here: I read a really interesting article that convincingly shows how the Ukraine War connects to the international drive for all these materials, especially lithium, nickel, and rare earths, and that Ukraine's mineral wealth may be a very important factor behind Putin's invasion decision! Here's the link: (https://www.mei.edu/publications/ukraines-critical-minerals-and-europes-energy-transition-motivation-russian aggression)

The last set of materials to cover are those that power EV magnets (the 17 exotic and extraordinary minerals which are collectively, and quite misleadingly, known as "Rare Earth Elements," or "REEs"). Misleading, because they, like lithium, are actually quite widespread, but again are concentrated enough for mining only in a few places. First- what are they, and what can they do?

First, the magnets act to speed up the electric motor, through generating magnetic fields that drive the wire core to spin, which in turn rotates the vehicle's axles and propels it forward. As if that function wasn't important enough, the magnets are also essential in: heating and cooling; moving the windows and door locks; governing braking; operating sensors; and even running the entertainment system! The magnets, to promote the necessary efficiency in an EV, have to be as light and powerful as possible. Right now just one type of magnet, containing a specific rare earth, neodymium, meets that challenge: neodymium-iron-boron (NdFeB), introduced in 1983. That means that, of the 17 REEs, neodymium is the most valuable material for EV battery motors (another, dysprosium, keeps magnets from demagnetizing at high temperatures). However, the REEs are always found in some sort of combination, requiring a high-energy separation process. That process, including dissolving the rock in acids, can be enormously destructive to the local environment; in the case of Baotou, the Chinese REE boomtown of 2.5 million, processing has created an industrial hellscape, including a large lake of toxins (it can be seen on a number of YouTube videos).

Yet again, it was the Chinese government that acted first on the importance of REEs, well ahead of other nations. Long before the rise of EVs, China, as a Communist ally, was already exporting REEs to be a "strategic resource," banning foreign investment. Initially China was focused on the mining end, exporting the minerals for processing. That ended in the 2000s, when the government began to fund processing plants (as well as subsidizing the EV industry). By then China had gained almost total control of the global REE supply chain. The U.S. had had one major mine, at Mountain Pass in the Mojave Desert of California, but its company went bankrupt.

Vulnerability about rare earths became apparent to other governments suddenly, when, in 2010, after a minor maritime border clash with Japan, China suddenly slashed its REE exports (just as Tesla was leading the EV rise). Part of the reason (it turned out) was that it was imposing stricter environmental controls, but both the U.S. and the EU (which imports 98% of its REEs from China) scrambled to respond to the Chinese monopoly. Meantime the Chinese government trained thousands of specialized engineers from 2011 on, alongside buying up patents for REE tech, thus putting the nation even further ahead (this time in research and development). The dirty business of mining has now moved almost entirely across the border to Myanmar (Burma) in Southeast Asia. There the military dictatorship is financing its brutal attempt to crush a rebellion by the profits from unregulated REE mining in its northern rainforest. Almost all is being exported to China. Much like cobalt for the DRC, this mining is causing great damage to the health of miners and locals, and to the local ecosystem.

Researchers in other nations have been looking into alternative magnet materials (none have matched neodymium yet), and carmakers outside China have been trying to reduce the amounts in their batteries (right now EVs have between 4.5-11 pounds, 2-5 kilos, of REEs in each vehicle). In the U.S., the Mountain Pass mine was reopened in 2018. The U.S., Australia, and the EU have all recognized now that Chinese REE control is a major national security (and energy transition) problem. They have been creating partnerships (including between the EU and Ukraine on the eve of the invasion; the latter has large unexploited deposits). They are beginning to spend billions of dollars on subsidies to businesses starting mines and refineries within their own borders (Sweden is currently the best prospect within the EU). In the U.S., Tesla has plans for a refinery on the Texas coast, and Idaho is opening up as another source area. An Australian company has sought to open a big mine in Greenland, only to face grassroots resistance, because of uranium in the same deposit, and rejection of a permit after an election (the company is still appealing). But, despite much effort, expense, and hype, actually producing enough REEs to compete with China will not happen any time soon.

So there you have it, my thumbnail of the story of the current race for the materials needed for the batteries and magnets in electric vehicles: lithium, cobalt, nickel, and rare earths. It's an extraordinary, sprawling story, one that kicked off in the 1990s and one which has dramatically widened across the world as the EV transition has accelerated (pun intended!) in the last few years- from the Australian Outback, to the deserts of Chile and northern China, and the forests of the Congo and Myanmar. It's a high stakes story, one in which big fortunes have been and will be made (and lost), one that has had significant tragic local effects on workers and the natural environment. It's also a story deeply entwined with major geopolitical events, including the Ukraine War. China is, as with EVs themselves, at the heart of the story, as the dominant global player- for now. Securing enough of these materials, as the Biden Administration has recognized with its massive spending to catch up (the Inflation Reduction Act of 2022), will be a major determinant of the ways that each nation, and the world as a whole, will make the transportation transition away from fossil fuels (more urgent by the day!!).

Hope you've enjoyed the read; as always, your feedback is welcome!