The Tesla Effect: The Impact of EVs on Lithium-Ion Cell Demand
Many industries struggled to meet sales targets as a consequence of the pandemic. By contrast, the Electric Vehicle (EV) market not only boosted growth but surpassed expectations with record-breaking numbers. The International Energy Association (IEA) reports that “electric car sales worldwide climbed to over 3 million and reached a market share of over 4%.” In comparison to 2019, the 2020 numbers are equivalent to a growth of over 40% in global sales.
While far from taking the lion’s share of the automotive market, the prevalence of electric vehicles continues to trend upward. EV charging stations at shopping malls and along highways are far more commonplace now than even five years ago. Specifically, between 2015 and 2020, the number of charging stations in the United States alone more than doubled. In 2021, that number grew by over 55%.
As the demand for EVs increases so too does the demand for all components related to the surrounding infrastructure and building and maintenance of these vehicles.
The influence of key materials and the Tesla Effect
One of the EV components making recent headlines is battery-grade lithium carbonate. Lithium carbonate is one of the materials used in the composition of a battery cathode. While other metal compounds are used in lithium battery cathodes, there is no substitute for lithium carbonate. Every 18650 lithium-ion battery produced uses about 2 grams of lithium carbonate equivalent (LCE).
Tesla, a company that had no appreciable automotive sales in 2012, is now delivering on the order of 200,000 vehicles a quarter. These 200,000 vehicles use up to approximately 1.2 billion 18650 lithium-ion cell equivalents per quarter. For perspective, a cell phone or tablet uses up to the order of one to two 18650 lithium-ion cell equivalents. A car-sized EV uses approximately six thousand 18650 cell equivalents.
The number of lithium-ion cells consumed by the EV industry dwarfs the usage rates of other traditional lithium-ion applications like cell phones, tablets, computers, sensors and power tools. Other automotive companies are now offering a wide range of vehicles powered by lithium-ion batteries, which also use approximately six thousand 18650 cell equivalents per vehicle. The amount of lithium carbonate now being used by these car companies for their electric vehicle batteries is staggering.
A market share of 4% may not register as significant from a sales perspective, but the consumption numbers on lithium carbonate alone have placed enormous strain on the supply chain. In remarkably quick succession, Tesla has become the largest single user of lithium-ion cells in the world, as well as one of the largest co-producers.
Consider key mitigation strategies
With the EV market showing no signs of slowing down, the question facing many companies is how to secure adequate lithium-ion inventory in an overstretched supply chain. Fortunately, there are some mitigation strategies that have shown marked success.
- Partner with a trusted supplier: Look for battery companies with an ERP system, a recognized quality management system, UL or IEC listed and tested battery packs, and knowledge of international shipping regulations (IATA, IMDG, US DOT, ADR, etc.)
- Alternative Cell Types: The component cell of a lithium-ion battery is a critical component, so having an alternative cell type in a battery pack, from an entirely different cell manufacturer, can mitigate the risk of one cell type becoming unavailable.
- Existing Inventory: The only other way to mitigate this is to use a company that carries a large amount of cell inventory. Lithium-ion cells have a very long shelf life when stored and handled correctly (on the order of years), so carrying a large inventory is not detrimental to the cells.
The common thread in all three strategies is a proactive approach. As all roads point to electrification as the way of the future, companies in the battery world must be vigilant in their watch of trends like EV growth.
When it comes to lithium-ion cells, the smallest components can have the biggest impact.