The focus of this edition of the Automotive Industry Spotlight is the mine-to-battery equation and the ‘green' nature of EVs not being inherently clear considering the greenhouse gas intensive nature of battery manufacturing.
In industry news, Ford took a major hit on profitability in the first quarter as it voluntarily delayed deliveries of its F-150 models to solve production quality issues. The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) won a major victory at Volkswagen's Chattanooga plant as its workers voted to unionize. Nissan announced significant cuts to its full year profitability and sales guidance, citing missed forecasts for volume and voluntary payments to suppliers.
In regulatory news, Ford recalled 457,000 Broncos and Mavericks due to vehicles stalling, per the National Highway Traffic Safety Administration (NHTSA). Tesla reached a settlement with the family of a fatal crash victim involving their autopilot system. A bill introduced by 18 Republicans to undo Environmental Protection Agency (EPA) tailpipe emission standards failed to receive the required votes to avoid 2030 to 2032 EV-light vehicle sale targets.
Industry Focus — The EV Battery Lifecycle
The rapid growth of EVs in the United States has placed significant strain on the automotive supply chain and, specifically, the sourcing of critical minerals for EV battery development. Federal regulations have tightened requirements for mineral sourcing for automakers, particularly as they apply to tax credits for consumers purchasing EVs.
Changes in mineral sourcing requirements have led to significant shifts in sourcing capabilities and industry ramp ups throughout the automotive supply chain, presenting a significant remaining hurdle for automakers hoping to achieve profitable EV business units.
EV batteries and their assembly processes also still carry significant carbon footprints from mineral extraction processes and electricity sources. Significant questions remain on the resale and recycle market for EV batteries — a key point for consumers and automakers alike.
Where does my battery come from, and from what is it made?
A vast majority of EVs worldwide are powered by lithium-ion batteries, which are used for their high capacity and minimal energy loss. A typical EV battery includes four key minerals:
Supply chain considerations for automakers are conceptualized under a ‘mine to battery' roadmap. In its current form, the mining and processing supply chain for lithium-ion batteries is heavily globalized:
Recent legislation has put geopolitically-driven regulations in place for critical mineral sourcing for use in EVs. In 2024, 40 percent of the value of “the critical minerals contained in the battery must be extracted or processed in the United States or a country with which the United States has a free trade agreement or be recycled in North America” per the Inflation Reduction Act. This would exclude minerals extracted or refined in China, which currently controls a significant portion of the global critical mineral refinement market. As a result, critical mineral extraction has ramped up considerably in the United States and Australia.
A greener footprint, but ‘end of life' challenges remain
With the current state of mineral extraction, refinement and the power sources fueling the U.S. electric grid, the ‘green' nature of EVs is not inherently clear. Because the process to manufacture EV batteries is more greenhouse gas intensive than an internal combustion engine (ICE), a typical EV requires a driver to drive between 15,000 and 25,000 miles before net emissions benefits are realized. For the average American, this is achieved in 18 to 36 months.
While recycling processes for EV batteries are still new and remain labor intensive, some of the critical minerals in the battery retain considerable value: Nickel and Cobalt can be recovered at such a high rate out of ‘end of life' batteries that they could considerably reduce the future demand for mineral extraction. Safety concerns for dismantling lithium-ion batteries at end of life — which is estimated to be 200,000 miles — are abundant; without proper oversight or care, the batteries can catch fire and present significant danger to landfill sites or recycling crews.
Cost burden remains, with no real end in sight
While the environmental benefits of an EV are taking clearer shape for consumers, cost challenges with the evolution in mineral sourcing processes for batteries continue to take a toll on automakers. The primary difference in the manufacturing cost profile for EVs is the lithium-ion battery compared to a traditional ICE. While the cost of an EV engine can vary based on its composition of critical minerals, their cost compared to their ICE counterparts varies materially. For a new Cadillac Escalade IQ EV estimated cost per powertrain battery is approximately $22,500; by contrast, a new Escalade ICE is estimated to cost approximately $8,000. The cost difference to produce those batteries is contributing to significant losses for domestic automakers; In 2023, Ford lost an estimated $40,525 per EV sold.
Mineral sourcing requirements, while designed to improve longer-term supply chain prospects, will lead to continued near- and mid-term cost challenges for automakers. With rapidly changing supply chain sources for critical minerals and billions of dollars committed to ramping up battery production domestically, the path to profitability through streamlined lithium-ion battery manufacturing remains steeply uphill.
Additional April insights are included below.
Industry Update
March inventory levels ended at 2.58 million units, an 83,000-unit increase from February. Days' supply closed at 47, approximately 7 percent above the five-year average. Inventory at the Detroit 3 led the way for the U.S., with a 67,000-unit increase in inventory, driven by an increase in light trucks.
Regulatory Landscape
Tesla Cybertruck Recall: The automaker announced it would recall all of its 2024 model Cybertrucks following reported issues that accelerator pads may dislodge and become stuck in the car's interior trim, cutting torque on the accelerator and brake pads. The company has previously delayed deliveries of the vehicle model due to issues with the accelerator pedal.
NHTSA announces recall of 457,000 Ford vehicles: Ford is recalling 457,000 Bronco Sport and Maverick vehicles due to a defect in which the vehicles are unable to start, or they stall when coming to a stop.
Bill to undo EPA tailpipe emission standards fails to pass the Senate: The bill, introduced by Senator Mike Crapo (R – Idaho) and co-sponsored by 17 Republicans, sought to dismiss the final EPA policy towards tailpipe emission standards. After intense negotiation with industry leaders, the EPA settled on EVs to make up 30 to 56 percent of light-vehicle sales by 2030 to 2032, where it had originally planned 67 percent. The bill to undo the revised emission standard was voted down 52 to 46, falling short of the 60 votes required to pass.
Originally published 30 April 2024
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