A battery pack heads to the chassis line at the Rivian plant in Illinois.
Courtesy Rivian
The menu of shortages is expanding for car makers.
First, the appetizer: the chip shortage. The main course: batteries for electric vehicles.
The auto industry better get cooking.
R.J. Scaringe, the CEO of Rivian Automotive (ticker: RIVN), served up the prediction last week at a media tour of the EV startup’s plant in Normal, Illinois. Construction on a plant in Georgia plant is slated to open in a couple of years.
“Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years,” Scaringe told The Wall Street Journal. “Meaning, 90% to 95% of the supply chain does not exist …Semiconductors are a small appetizer to what we are about to feel on battery cells over the next two decades.”
A semiconductor shortage has held down automotive production for more than a year. The industry is making roughly 2 million fewer cars a quarter that it could— and would, given demand—if there wasn’t a shortage. Chip companies are trying to increase the supply, but new capacity takes time and the shortage is expected to linger for years.
EVs represent about 10% of the new cars sold worldwide—less than 5% in the U.S.— in the past several months. But demand is growing from drivers around the globe. In America, the push is coming from the government as well.
President Joe Biden, for instance, wants roughly half of all new vehicles sold in America to be electric by 2030, part of a plan to make the auto industry more competitive, especially against China. That goal looks easy to meet if auto makers hit their own goals. General Motors (GM) wants to sell a million EVs a year in North America by 2025 and Ford Motor (F) has its sights set on 2 million a year around the globe by 2026. Wall Street projects Tesla (TSLA) will be selling 4 million to 5 million cars a year by mid-decade.
A lack of batteries might hamstring all that growth. That’s why all auto makers— Rivian included—are investing billions of dollars in new capacity, many with battery companies as their partners.
Ford and SK Innovation (096770. Korea) are building plants in Kentucky. GM and LG Chem (051910. Korea) have a few plants in their plans, one in Michigan. Chrysler parent Stellantis (STLA) and LG are putting a plant in Windsor, Ontario, Canada—across from Detroit. Tesla buys batteries from many suppliers and has battery manufacturing capacity, too. And Rivian buys batteries from Samsung SDI (006400.Korea), and the companies have talked about a joint venture.
A handful of auto makers are even looking higher up the supply chain—at battery material miners and makers of batter components, such as cathodes. Price might be why.
A basket of metals that go into EV batteries is up almost 60% year to date, adding roughly $1,700 to the price of an average EV. Part of the reason for increasing prices is tight supply.
If auto makers hit their announced goals, the world should be buying 20 million to 25 million EVs by mid-decade—triple from 2022 sales expectations. That gives the EV supply chain only a couple of years to get ready.
Write to Al Root at [email protected]
