Lithium may be the next microchip shortage

FAIRLAWN, Ohio—OEMs are ambitious. Perhaps too ambitious.

At least when it comes to projections for the electric vehicle market.

In his presentation, "The Rapidly Changing Automotive Market," Casey Selecman, director of powertrain forecasts at AutoForecast Solutions L.L.C., said auto makers, on average, anticipate the global automotive market will be 92 percent EV by 2040.

To put this into perspective, AutoForecast's projection is 55 percent by 2040. And the U.S. alone is pushing for 80 percent by 2050, he said.

So it's no surprise that Selecman, who spoke in Fairlawn during the Rubber in Automotive Conference, organized by Rubber News, claimed that this over-ambitious scenario "literally is physically impossible."

The biggest reason? There simply are not enough materials on the planet to support this.

"We don't have enough materials to make (EVs)" to meet this scenario, Selecman said. "They don't exist, and they take a long time to exist."

Looking at the core raw materials that go into an EV battery—lithium, nickel, cobalt, aluminum, copper and graphite—there's a lot of mining to do, he said.

While materials like copper and aluminum should cause little problems, the automotive industry will need to double the total global volume of nickel by 2032.

To that, Selecman said, "Good luck."

As for cobalt, he said, there already are very few cobalt mines, noting that the material is typically a byproduct of manufacturing with nickel and copper. That, too, will need to double in the next 10 years to support this EV scenario.

And graphite, an industry that is dominated by China and Russia, will need to increase up to four times by 2040.

But the real kicker is lithium.

"I think next year, maybe the year after, instead of chip shortages, we'll start talking about lithium shortages," Selecman said. "Which EVs can't be built because we don't have enough lithium? That's going to be the next conversation to talk about."

In this 90-percent EV market scenario, the automotive industry will need to double the total lithium mines on the entire planet every other year for the next 20 years, Selecman said.

While he admitted that these are rough estimates as the scenario doesn't factor in the effects of recycling batteries, there are so few EV battery recyclers available today that it may not make much of a difference.

"The amount of recyclers on the planet for these batteries, we could probably count on one hand," he said.

And it's certainly possible to recycle the batteries, he said, noting there are "two or three" companies in Europe already doing it and that he suspects the U.S. will follow suit.

But for now, it all comes down to mining—assuming there are mines to be found for these materials.

"They've got to find mines, they've got to get them surveyed, they've got to get them EPA-endorsed," Selecman said of the EV battery industry. Then there's the need for smelting operations and processing.

"They've got to do all of this stuff to make this work," he said. "I'm just going out on a limb here: it's probably not going to happen."

And, of course, while more lithium is mined, the price per ton will only increase—by about 10 times in this scenario, Selecman said. Because the economics of mining is different from the economics of manufacturing parts.

While making more of the same part drives down the cost over time, "mining is the opposite," he said.

"We're mining the cheapest sources of these (materials) now, the richest sources, the easiest to get to," Selecman said. But the more these raw materials are mined, the harder they will become to find.

"The ones that are next are more expensive, more difficult to get, less rich, so I get less out of that same tooling, so the cost per ton goes up."

Currently, OEMs are funneling "tens of billions of dollars" into the electrification of the automotive industry, Selecman said, noting they are essentially betting on the idea that EVs are what consumers will want and that the supply chain will support this.