While conventional cars mainly consist of steel, aluminium and plastics, electric vehicles require very different raw materials. Electric motors need rare earths for their permanent magnets while batteries require lithium, and other raw materials. Most of these materials are in short supply and need to be sourced from outside of Europe.
Demand for these materials will increase dramatically within this decade as electrification takes off – for example in 2030, demand for automotive magnets will be six times that of 2022. In 2030, the market value for magnet materials will reach almost 8 billion Euro at prices from early February 2022. Motor designs which require less, or no permanent magnets are an alternative and will increase but we expect permanent magnet motors to remain the mainstream solution.
Growing electric vehicle (EV) sales will increase annual demand for batteries from 402 GWh in 2022 to 2,736 GWh in 2030 – increasing focus on materials such as lithium, nickel, manganese, and cobalt, which are required for most current battery chemistries. If battery capacities per vehicle remain high, automotive batteries will require huge amounts of these materials. Assuming current mining and processing capacities, we expect lithium, cobalt and nickel demand will outstrip supply by 2026 the latest.
Another main challenge is price fluctuation for these materials. We have modelled the sensitivity of price changes for raw materials, showing that for example cell prices for the currently popular NMC622 chemistry rise by 3.1% and 3.4% for every 10% price increase of the nickel and cobalt. In contrast, LFP cells do not contain nickel, manganese or cobalt but react to a 10% raw material price increase of lithium or copper with a cell price increase of 3.2% and 4.4%.
Securing access to and establishing recycling structures will be crucial for OEM and cell suppliers. We recommend OEMs to pursue a strategic battery cost reduction approach combining five levers, among them are new battery integration concepts and standardized cells. We also believe that battery recycling will become essential to ensure raw material availability and increase margin control for OEMs.
For more detailed information, please check out our entire study.
