Raw materials for electromobility

Germany's key industry is the automotive industry. It is shaping the transformation to emission-free, climate-friendly, individual mobility. Policymakers recently launched a series of measures to promote electromobility, including extending the eco-rebate for purchases of electric cars through 2025 and increasing subsidies for plug-in hybrids. But what are the consequences of a sharp increase in the manufacture of electrified vehicles and how does this affect the demand for raw materials?

Thanks to the manufacturers' cross-segment push for e-mobility, more electric vehicles are now found on Germany's roads. The increased range, due to a higher energy density, larger battery capacities, and optimized energy consumption, are leading to more sales of cars with electric drives. Nevertheless, it must be said that electromobility in Germany is still in its infancy, even if new registrations of electric passenger cars (BEV, PHEV, and fuel cell) in Germany reached a record high at the beginning of 2020. 

The combined total of new registrations reached 340,712 electric passenger cars on February 29, 2020. However, the VDA expects high growth over the next few years as the overall economy recovers from the coronavirus crisis, resulting in a sharp increase in demand for battery cells. Some companies, such as Volkswagen, Opel (PSA), Northvolt, CATL, or even LG Chem, are already planning their own production of battery cells in Germany, which are the heart of a battery pack.

For a key technology like battery-electric mobility, materials are used that were previously only found to a limited extent or not at all within the automotive industry. The main cost factors and components of electric vehicles are the battery and the electric motor. Raw materials required for the battery, such as lithium, cobalt, nickel, and graphite, are novel components in the automotive value-creation chain. For the electric motor, in addition to copper, rare earths such as dysprosium and neodymium are used in the permanent magnets. Dependence on China is particularly high for the rare earths, with a production share of around 80%. This creates demand from both manufacturers and suppliers for previously unused raw materials that have to be mined outside Europe and then imported.  

The increasing demand for these predominantly metallic raw materials could lead to bottlenecks along the value chain, at least temporarily. In addition, if demand increases while supply remains the same, prices are likely to rise – taking the entire battery pack into consideration, between 50-60% of the total costs today are due to the raw materials. A reliable and consistently priced supply is necessary for Germany's success in mobility. Electromobility is putting significant pressure on these raw material markets, such that the VDA sees an acute need for action to ensure the competitiveness of the German automotive industry in the future.

To accompany this transformation, the VDA and its member companies are concerned with the availability and sustainable procurement of those raw materials identified as critical. Regular analyses of the supply and demand situation for individual raw materials are intended to identify potential bottlenecks at an early stage as a form of strategic raw material management. The further development of technologies, possible substitutes, and the global ramp-up of electromobility have a tremendous impact on demand. On the supply side, new mining projects, higher capacity in existing mines, and secondary raw materials (recycling) are all being considered. In addition to physical availability, the focus is also on the establishment of a sustainable supply chain, requiring ecological and social sustainability factors, ethical aspects, the CO₂ footprint, and political risks to be identified, as well as any possible regional concentrations or monopoly positions.

In line with the exemplary role of the German automotive industry on the global market, the emphasis is not only on long-term monitoring of the raw material markets, but also on establishing sustainable raw material supply chains among the global production networks. Looking to the future, the German automotive industry is thus well on the way to further expanding its position as a leading supplier of electromobility.