What does it mean to make your supply chain for electric vehicles more sustainable?
You can’t build electric vehicles without nickel, rare earth elements and copper. And you’ll need lithium and cobalt for battery electric vehicles (BEV) and platinum for fuel cell electric vehicles (FCEV). We identified these six materials as critical in our study conducted for and published by e-mobil BW. (Note: The report is written in German.)
Complex, but Essential
The supply of raw materials for electric vehicles (EV) is a highly complex topic. However, ignoring it won’t make it less complicated. On the contrary, if we don’t deal with the supply of raw materials now, it will backfire on us within this decade. So, manufacturers need to examine the supply chain of raw materials necessary for building EVs. As a next step, original equipment manufacturers need to work with their suppliers throughout the development process. This can involve the EV-producing company as well as the suppliers along the supply chain. It’s easier to start with one supplier and expand your knowledge of the process step by step.
Six Key Elements
Our study found cobalt, copper, lithium, nickel, platinum and rare earth elements are the most critical. First of all, that means that there is a high supply risk for these materials. It depends on the static range and the regional concentration of the raw material production and deposits available across the planet. The higher the static range and the more countries produce and hold deposits of the material, the more the risk is reduced. In addition, examining the national political and regulatory risk completes the supply risk analysis. In a second step, it’s important to understand the technical and economic consequences that would occur if the supply risk turns into an actual supply shortage. Here, we need to know if there are substitutes and, if there are, how much more would it cost to build EVs with those substitutes? Two examples: You can’t build a lithium-ion battery without lithium, and you can’t build a fuel cell without platinum—there are just no alternatives right now.
When companies investigate raw material supplies, the topic and incentive to do something about it is mainly the price. However, if you want to holistically investigate the sustainability of your business and the consequences for your brand and reputation, you need to take social and ecological aspects of raw material sourcing into consideration. They include:
- Working conditions in the mines
- Civil rights
- Political framework within the country
- Social contributions by the local mining companies
- Environmental aspects
Admittedly, there are efforts to improve conditions in these five categories. The industry as a whole—and some companies in particular—have increased their awareness and made decisions that bring about change. But is this going to be enough? Unlikely, because companies can always do more to secure the well-being of people and the environment. Ultimately, we need to look toward the long-term future health of our planet and, thereby, our own future health.
For OEMs, we recommend the following steps to create a raw material supply chain strategy for EV production:
- Analyze the materials used in your product portfolio.
- Quantify the risks for your business.
- Prioritize the scope of action to take.
- Cooperate with material suppliers all the way up to the material source (i.e., the mine or the recycling facility).
- Increase your company’s sustainability knowledge and help create public awareness.
- Mitigate risk, for example, by reducing raw material dependency.
- Work with others to overcome the challenge of creating a sustainable transformation in the transportation sector.
As you can see, there’s a lot to do. So, we’ve got to get started today if we want consistent sustainable mobility tomorrow.