Batteries in electric vehicles are a key technology for designing a sustainable transport system and achieving long term climate protection targets in the transport sector. Since a tidal wave of demand for batteries is predicted, companies are getting ready to take advantage, with growing investment in R&D for both product and manufacturing. Growing demand not only triggers more production, but it also kindles technological innovation, which lowers cost. Innovation and economies of scale will further drive the adoption of battery electric vehicles as they become more affordable for the average customer.
The circular economy is spurring new thinking on EV batteries
For sustainable mobility to become a reality, it’s time to close the loop
But there’s a bigger problem facing OEMs and their battery supply chains: the extraction of raw materials and the production of technical components are associated with environmental and social risks. In addition, today’s second life applications and recycling are not scalable within short timeframes, and have cost constraints. Lastly, there is a growing range of legal requirements, such as the European battery regulation or the inflation reduction act, which favors local production.
As a result, it will become necessary to strengthen and diversify the battery supply chain, especially where raw materials are concerned.
To achieve a true regenerative future all stages of the battery value chain need to be considered - from raw materials and refining, to R&D and production, and on to second life and recycling.
1. The battery value chain of a more sustainable future
OEMs must diversify their battery supply chain to mitigate the risks of delivery shortages and improve sustainability. Production facilities, mining infrastructure and processing infrastructure must be set up to meet growing demands. To achieve this, OEMs must build a strong battery network and cooperate with a variety of experienced partners, or consider setting up their own facilities.
2. Raw materials are crucial for battery supply
Volatile raw material markets impact everyone, from raw materials producers to OEMs intending to ramp up EV production and sales. For example, battery-grade lithium is up 95% since the beginning of 2022. Uncertainty over future battery compositions must be mitigated. As the next generation of batteries may result in a decrease in nickel and cobalt demand, the precise make-up of raw materials will continue to fluctuate. Therefore, the need for transparency, data and effective risk management is growing.
3. R&D and production trends enable continuous improvement
Battery design is ever-changing to adapt to mass market demands, but for the next few years Li-Ion technology is expected to continue. This means that future gigafactories need to be flexible and scalable to not only meet future demand, but to be capable of shifting future battery technology requirements.
As the circular economy gains traction, different actors in the value chain will need to share information about materials all along their supply chains. There are various initiatives that can help manufacturers, brands, and OEMs trace raw materials from their source all the way to the end products by sharing data about their products while retaining information privacy. The Digital Product Passport and supply chain start-ups using blockchain technology will likely play an increasing role.
4. Recycling & second life solutions as business opportunities
Leaders must consider battery end-of-life scenarios now, because the design and construction of batteries will be crucial when it comes to recycling. The design and construction of the batteries and the required recycling infrastructure both take time.
On top, a holistic evaluation and strategy for dedicated use cases, players and target markets with regard to recycling and second life use cases is needed. The relevance of a strong partner ecosystem to tackle challenges cannot be overestimated. Above all, economic improvements to comparably high costs of realizing end-of-life use cases and process and technical advantages are required to realize largescale adaptation. Establishing dedicated strategic partnerships and sourcing strategies enables the players to provide and scale second life applications and recycling facilities in a joint effort.
EU regulation calls for OEMs to collect more than 70% of EV batteries. But even by 2030, recycling will only be able to cover up to 10% of global demand. The relatively high longevity of batteries and longer usage phases are a great asset, and one which will continue to increase over time. Therefore, it might be beneficial to deprioritize second life application in e.g., energy storage, and to keep more automotive grade battery material in the primary closed loop. For more detailed analyses on how to apply circular economics to EV batteries, download today Powering Change – How batteries can foster the electric vehicle revolution.