Car bosses warn of supply chain threat to electric vehicle rollout


The world’s biggest automakers have warned that supply chain disruptions and rising commodity prices are threatening the rollout of electric vehicles, even as demand for battery-powered models far outstrips current production capacities. builders.

Speaking at the Financial Times’ eighth Future of the Car Summit this week, Tesla chief executive Elon Musk questioned his company’s ability to meet its target – set just a few months ago. – to deliver 20 million electric cars a year by the end of the decade, calling it “aspiration, not promise”.

“We can stumble and miss that goal,” the unusually conservative Musk told the conference. “There are raw material constraints that we see coming, in lithium production, probably in about three years, and in cathode production,” he added.

Musk’s comments were echoed by several other industry leaders at the annual event, unlike previous summits where executives announced ever more ambitious electric vehicle goals.

In 2021, even as the semiconductor shortage showed few signs of easing, Mercedes-Benz boss Ola Källenius told attendees that his company would move “faster” when it came to phase out combustion engine models and build electric alternatives.

But the tone at the top this week was decidedly more reserved. Not a single executive announced higher targets for electric vehicle sales or battery production. Tesla’s closest competitor Volkswagen, which has long aimed to overtake its rival in electric vehicle sales by 2025, played down its chances of hitting that target, calling it “very, very tight”.

“A lot of people are now, I think, a bit too optimistic,” VW chief executive Herbert Diess said, referring to the rollout of electric vehicles around the world.

Speaking from the back seat of VW’s latest electric model, an emissions-free version of the 1960s motorhome, he added: “We need power, we need charging networks, we need the infrastructure, of course, we need the cars. , but we also need batteries and raw materials.

Industry analysts, Diess said, weren’t taking “the amount of effort it takes to make this change happen” seriously enough.

The warnings from the two major electric vehicle makers came as consumer appetite for battery-powered vehicles continues to outpace industry expectations.

After VW, which plans to sell around 700,000 electric vehicles in 2022, revealed it had sold no more battery models in the US and Europe for the rest of the year, Mercedes-Benz’s Källenius said at the top that was “largely true for us as Good”.

Tesla’s Musk said he was “not thinking about demand generation and a lot about production, engineering and supply chain,” adding he wouldn’t rule out buying a mining company to secure the raw materials needed to scale up electric vehicle manufacturing.

Ongoing bottlenecks in the supply of crucial battery raw materials have dampened analysts’ expectations for the electric car industry as a whole.

Wells Fargo researchers who this week looked at raw material prices for components of a Tesla Model Y found “several ‘surprises’ that challenge the notion of imminent [battery electric vehicle] adoption”.

Tesla boss Elon Musk interviewed at FT’s Future of the Car summit this week © Em Fitzgerald/FT

“Rising battery raw material costs have delayed [battery electric vehicle] cost parity at [internal combustion engines] at least a decade,” the bank warned, referring to when zero-emission vehicles become as cheap as gasoline or diesel equivalents.

As a result, Wells Fargo analysts downgraded General Motors and Ford because US companies would “likely be forced to sell money-losing compliance products.” [battery electric vehicles]to meet increasingly stringent regulatory objectives.

Their assessment was backed up by Renault chief executive Luca de Meo, who told the FT conference that the supply chain crises meant “the game has changed” and automakers “have to play according to new rules”, which would make them dependent on energy efforts. and mining companies.

He warned that the French group may not achieve cost parity for mid-range models by 2025, and that could dampen demand for electric cars. “We know that the purchasing power [of] people in many parts of the world will not necessarily increase,” De Meo said.

Meanwhile, generous subsidies for electric car buyers in China will be phased out by the end of the year, making it harder for low-income people to switch.

Rival automaker Stellantis has warned that batteries will become scarce in just two or three years, making it difficult to roll out affordable electric vehicles.

“The rate at which everyone is currently building battery manufacturing capabilities may be at the limit to be able to support the rapidly changing markets in which we operate,” said Stellantis chief executive Carlos Tavares.

“We are not approaching this transformation on a 360-degree strategic approach,” he added. “Everyone is going to put electric vehicles on the market. So what’s the next step? Where is the clean energy? Where is the charging infrastructure located? Where are the raw materials?

To help tackle the raw materials crisis, Mercedes’ Källenius called on Europe to emulate the raw material supply strategies implemented by China and the United States and to develop “more trade agreements bilateral. . . beyond perhaps the three traditional regions”.

The EU, he said, should consider entering into agreements with mineral-rich countries such as Australia and India as well as with states in South America, and create closer relations. with “economies that might have some of those raw materials that we need for electrification.”

But most executives agreed that the industry’s woes would not fade quickly.

“[This is] totally different from what I used to say a year ago, which you know, we’re getting better, we’re getting better, one day we’ll be perfect,” said Nissan Chief Executive Officer Ashwani Gupta.

“For me today, the supply chain crisis is the new normal.”


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