Ford CEO on EV transition: “Batteries are the limitation”
Companies like Ford ( F ) are collectively pouring hundreds of billions of dollars into electric vehicles (EVs).
But as the industry transitions to zero carbon emissions, battery supply chains can stand in the way of these ambitions.
“First of all, batteries are the limitation here,” Ford CEO Jim Farley told Yahoo Finance Live (video above). “Both lithium and nickel are really the key limiting commodities. We usually get those from all over the world — South America, Africa, Indonesia. We want to locate it in North America, not just the mining, but the processing of the materials.”[ads1];
Farley pointed out that even raw metals mined in the US are often sent back to China for processing, something the US is actively trying to counter through subsidies and additional investment.
“The big change is going to be onshore all that processing capability, but also mining back in the US,” Farley added. “It will be a big job, just as it has been for semiconductors.”
By 2021, electric vehicles will account for approximately 10% of all vehicle sales globally, according to the International Energy Agency (IEA). By 2030, BloombergNEF estimates that half of all US car sales will be electric cars, spurred by tax credits in the Inflation Reduction Act.
As demand for electric cars and trucks increases – and there will need to be an estimated 300 million electric cars on the road by 2030 to stay on track with net-zero benchmarks – so will demand for the precious minerals used in batteries. .
It could in turn test the global supply chains that extract and process minerals.
The US has outlined five minerals it considers “critical” to the EV transition that have supply chains at risk: lithium, cobalt, manganese, nickel and graphite. Legislators and those in the mining industry have already sounded the alarm about mineral supply.
“It’s going to be a real scramble to get the material,” Piedmont Lithium ( PLL ) CEO Keith Phillips told Yahoo Finance in September about lithium mining. Lithium is a key component in lithium-ion batteries, the most dominant type of battery. battery used in the electric car industry and the type used by Ford. The average electric car battery uses about 8 kg to 10 kg of the metal.
“We don’t have enough in the world to turn around that much production in the world by 2035,” Phillips said. In particular, demand for lithium-ion batteries is expected to explode by more than 500% between 2020 and 2030.
Although the US has developed some capacity for battery production, China dominates the market with more than 70% of global EV battery production capacity within its borders.
China is the largest producer of graphite, a key mineral used in lithium-ion batteries, but its strength comes mainly from its refining capacity. Once a raw material is extracted from the earth, it is sent to processors to purify the mineral, which is then sent to manufacturers who produce the batteries that go into consumers’ cars.
Overall, raw minerals can travel as many as 50,000 miles before reaching a battery factory.
But as geopolitics, extreme weather and high commodity prices threaten these supply chains, many US automakers are making a concerted effort to strengthen their own networks.
Ford announced in February a new $3.5 billion investment in a new battery plant in Marshall, Michigan, as part of its $50 billion global push toward electrification. The automaker acknowledged a $2.1 billion loss in its Model E electric division in 2022 and said it expects a $3 billion loss for the unit in 2023 as the company undergoes a restructuring and makes key investments in electric vehicles.
“We have to get these materials from all over the world until we locate the supply chain, which is what we want to do,” Farley said. “By the end of the year we will secure all the raw materials to make the 2 million batteries by 2026 that we need to go into our vehicles. We should be in good shape here.”
Yahoo Finance’s Akiko Fujita and Pras Subramanian contributed reporting.
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