As the world moves towards a more sustainable future, the demand for green vehicles, such as electric cars and hybrids, is rapidly increasing. However, the production of these vehicles requires specialized power electronics components and batteries, which are currently facing supply chain challenges due to material scarcity and manufacturing disruptions.
One of the critical components of green vehicles is the battery, which relies on four scarce materials: lithium, cobalt, nickel, and copper. These materials make up 50% of the cost of making a battery, according to McKinsey. The scarcity of these materials could present a significant challenge for EV makers and limit the growth of green vehicles in the coming years.
Nickel is particularly precious, and all of these materials are projected to experience shortfalls. The combined cost of nickel, lithium, and cobalt used in a lithium-ion battery has already increased by 430% since the Russian invasion of Ukraine. While technological compromises are possible, they may affect battery energy density and range, and other industries, such as steel, may need to consider using lower quality materials.
Moreover, the global political climate can also affect the availability of these materials. For instance, China is a reservoir for lithium, and tensions between China and Western nations continue to grow. Meanwhile, the mining processes for cobalt require careful examination on humanitarian grounds.
Another challenge faced by green vehicle manufacturers is the availability of automotive chips. EVs use twice as many chips as ICE vehicles, and many of the driver and passenger creature comforts and safety features are the same between EVs and traditional fuel vehicles. Semiconductors play a significant role in the electrical systems of an EV, which are much more extensive than in an ICE vehicle. For example, semiconductors are used in battery management systems to manage the voltage, current, balance, charge level, and health of the EV’s battery cells, as well as to link range extender or regenerative technologies to electrical systems.
The adoption of many ADAS and automated driving technologies in EVs also requires the use of sensors and transceivers, which are reliant on semiconductors for basic energy management and conversion needs.
Another challenge in the production of green vehicles is the need for specialized infrastructure. In many cases, new infrastructure needs to be built from the ground up, such as charging stations and parking garages. However, some companies are leveraging existing buildings and structures to limit cost expenses.
To address these supply chain challenges, green vehicle manufacturers should consider adapting their strategies to the five main stages in the electronics supply chain: planning, sourcing materials, manufacturing, delivery, and returns. The planning stage provides the best opportunity for manufacturers to adapt by utilizing various software tools, such as demand and inventory forecasting tools, shipping status tools, and collaboration portal tools. These tools enable engineering teams to re-engineer designs or plan for manufacturing once the right parts are available.
Tesla, for example, has resolved chip shortages by directly involving itself in the manufacture of its batteries and rewriting software to make fewer semiconductors go further by functioning more efficiently. Other automakers have scaled back features or reduced production quotas in recent years, simply producing fewer cars and driving up the cost of new and used vehicles as a result.
Green vehicle manufacturers should also adopt new transparency and authorization technologies. For example, Tesla uses blockchain technology to ensure that raw materials are obtained from sustainable sources. Other companies, such as Renault, BMW, and Mercedes-Benz, are developing their own blockchain solutions.