An industry exists when a network of organizations—including suppliers, distributors, customers, competitors, manufacturers, government agencies, and many others—are involved in the delivery of a defined product or service through both competition and cooperation. For example, each entity in the fashion industry is part of an ecosystem that includes: perfumers, jewellers, fabric mills and textile printers; hair colourists, photographers, makeup artists, shoe, hat and handbag makers; manufacturers of sewing machines, needles and pins, and components like buttons, thread, zippers, trims, epaulets, belts, scarves, cords, braids, tassels, buckles, snaps, bows, barcodes, cuffs, and collars. The activity of one entity affects and is affected by the others. This creates a continuously evolving matrix in which each entity in the industry must adapt to survive in the ecosystem.
But then again, assembly is not manufacturing, while every manufacturer assembles goods. So what differentiates them? One way is to look at how much of the content of a product is built in-house versus by a supplier. The importance of making this distinction helps in understanding supply chain risk profiles of companies. Some brands consider themselves assemblers. Only 30% of the components they use are made in-house. Electric Vehicle (EV) architecture has about 5 kilometers of electrical cables for telematics, infotainment, content transfer experiences, video for teleoperated driving, and over-the-air (OTA) software updates. Brands are now struggling to obtain wire harnesses as Leoni’s two factories in Stryi and Kolomyja experience production disruptions in Ukraine.
A highly skilled workforce in Ukraine convinced Prettl, Yazaki, and Kromberg & Schubert to establish a lucrative wire harness production sector in Ukraine. Wire harnesses were Ukraine’s most critical automotive component exported to EU states. About twenty-two automotive companies have invested about $600 million in 38 plants in Ukraine. Some of these manufacture wire harnesses and employ over 60,000 Ukrainians. These suppliers may take months to find venture capitalist, skilled workers, tools, factory space, and machinery to increase capacity in new locations.
To effectively build a thriving automotive industry, Britain is now examining the energy storage challenge for EVs. Falling behind is not an option. The choice is to either import EV batteries from Europe or to find suitable sites to build the new “gigafactories” given the trading rules that limit the importation of batteries from some markets. Benchmark Mineral Intelligence is a price reporting agency that provides proprietary data, and market intelligence for the lithium-ion battery to EV supply chain. Benchmark predicts that the UK will require a minimum of 175 GWh of battery capacity to support about 3 million EVs.
By 2030, Benchmark expects Britain to reach 56.9 GWh, against 821.3 GWh for European countries. Germany plans to build seven new factories and is tipped to have seven times the UK’s capacity by 2031. The same is expected in Norway, France, Hungary, Sweden, and Poland. UK-built automobiles, if they hope to avoid taxes in their main EU markets, must meet the “rules of origin” that stipulates that by 2027, 70% of an EV battery pack is either British or EU-made. EV batteries are notoriously heavy and expensive to transport. This makes local production critical. EV battery chemistry also varies. Battery chemistry and EV models convolute production contracts as a wave of EV models will be on the market by 2025. To support the automobile industry, the UK may need about four to six large battery plants.
The cost of metals that go into lithium-ion batteries was up about 40% before the events in Ukraine. It has risen another 13% since then. Tesla, Ford, and General Motors aim to provide roughly seven million EVs globally by 2026—more than twice the number sold in 2021. But energy storage supply chains will find it difficult to keep pace. Prices for battery materials are spiking. Demand is outstripping production. Tesla is putting money into the mining level of the supply chain, and has invested in U.S. production capacity to manufacture graphite battery anodes.
Collectively, the lithium triangle countries, which include Argentina, Chile, and Bolivia, account for more than fifty per cent of global lithium resources. Chile is the second-largest producer of lithium, a critical component used to make batteries that power EVs and renewable power plants. Lithium triangle nations wish to propel themselves further up the EV battery supply chain and avoid the resource curse, and the side effects of lithium mining that include depleted water resources, loss of biodiversity, and imbalance to indigenous ecosystems. Efforts to build a greater presence along the EV battery supply chain come at a time when the pandemic portal and events in Ukraine have splintered traditional trade ties, and accelerated the green and digital transitions.
The U.S. Department of Energy (DOE) plans to provide $2.91B to enhance the production of advanced energy storage devices to bolster a burgeoning clean energy future that includes EVs. The DOE intends to fund battery materials refining and production plants, battery cell and battery pack manufacturing facilities, and recycling facilities that create clean energy jobs of the future. This investment will ensure that the US can manufacture batteries, as well as the materials that go into them, to increase economic competitiveness, energy independence, and national security.