A British media this week reported that production of Jaguar I-Pace electric cars will be stopped for one week next week due to battery shortage. In view of the competitive nature of the Electric SUV space, what could be the reason(s) for the battery shortage?
It is noted that Jaguar sourced their batteries from LG Chem which makes their batteries in Poland. Since the Coronavirus is not an issue in Poland, the shortage of battery is likely not the result of virus induced factory stoppage.
Possible reason of slowdown in production
It is possible that the battery shortage could be due to other factors such as an obstruction in the supply lines of raw materials. In the Jaguar case, based upon the production and anticipated sales volume and their battery size (90 KWH), only a capacity of 1.62 GWH is needed for an entire year.
This volume should be chicken feed being only less than 1% the total global 220 GWH (produced in 2018).
Mercedes Benz was also reported as saying that the sales launch of their EQC400 SUV in the US would also be delayed to early 2021. This is despite clear publicity that the EQC will hit US showrooms by early 2020.
So it is logical to say that what pundits are saying about the vulnerability of the raw materials supply chain will be severely tested by the ramp-up production.
This ramped-up demand could be due to a seemingly synchronized rush of all legacy car makers going electric almost at the same time.
Considering that most of the key minerals used in the lithium-ion battery are listed in the US’s list of minerals which are critical for national economy and security.
While manganese, aluminum and lithium which are also listed, the supplies of these appeared stable and sufficient. The most vulnerable listed mineral in the supply chain is cobalt.
The DR Congo supplies 50-60% of the world’s cobalt. The supply of cobalt is indeed very restricted. Any political or social unrest could easily disrupt the flow of the cobalt from the country. Did cobalt cause the supply of batteries to be lacking?
Considering that batteries need to be made in factories, could it be that the global infrastructure of battery factories is not keeping pace with the upsurge in demand for batteries…rather than the shortage of cobalt? Time will tell the real reason.
Tesla continues to produce
In the meantime, it seems that Tesla with the head start in manufacturing EVs appeared to have secure their supply of these rare earth minerals. With the operation of their Giga-factories, Tesla would be the only EV maker that will have relatively stable supplies of batteries to be used in their EVs.
However if the Tesla really intends to ramp up production to 500,000 cars per year, will the present number of Giga-factories be enough?
Tesla is already ahead with the building of a third Giga-factory in Shanghai, China. When you consider that China is the world’s largest EV marketplace, it is not difficult to see why Tesla built the Giga-factory No. 3 there.
Additionally, if one considers that China is also the biggest global producer of refined Cobalt, then the location of the Giga-factory in China is well placed to take advantage of essential minerals supply.