This has got to be the worst time for a startup automaker to begin production of its offering or more globally, any product that uses a chip in it. The pandemic has hit the chip-making industry as well as other industries hard.
The effect of the semiconductor shortage is reverberating all over the world and in many industries especially manufacturing.
But something else is coming that could cause major disruptions to rivians manufacturing and its ability to get its vehicles made and delivered. In this article, we take a look at the upcoming battery shortage and how Rivian plans to maneuver its way through.
Since the chip shortage began two years ago due to the pandemic, OEM and car manufacturers have had to remove advanced features it was offering prior to the shortage, such as heated seats, automatic park assist, and more off of their vehicles to get them to consumers faster. Some have even halted production altogether because of the lack of these chips. The impact of the shortage has been so acute because no one saw it coming.
However, some automakers are planning ahead and developing strategies to avert the devastating effects of lithium and battery raw materials shortage on their business.
Anticipating Battery Shortages
In an interview and factory tour with the Wall street journal, Rivian CEO RJ Scaringe said
“The auto industry could soon face a shortage of battery supplies for electric vehicles” which could make the semiconductor shortage pale in comparison.
“Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years, Meaning, 90% to 95% of the supply chain does not exist.” he continued.
EV Battery Demand Surge
Demand for lithium-ion batteries has surged to 400-gigawatt hours in 2021, up from 59-gigawatt hours in 2015. The demand is expected to jump another 50% in 2022, based on data the publication got from Benchmark Mineral Intelligence.
The beginning point of this shortage will be at the mining stage of the process, flowing over to processing and supply as well as in building the battery cells. The semiconductor shortage when compared to material shortages for the production of batteries is “a small appetizer to what we are about to feel on battery cells over the next two decades,” he said.
Rivian isn’t the only Ev automaker concerned about this coming plague.
Tesla CEO also warned of skyrocketing lithium prices due to mining pace on April 8 in response to a World of Statistics tweet. Musk replied, “Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale unless costs improve. There is no shortage of the element itself, as lithium is almost everywhere on Earth, but the pace of extraction/refinement is slow.”
Tesla’s Strategy
Tesla is building a plant in Texas that will convert spodumene concentrate, which is processed rock containing lithium, into lithium hydroxide – “a key building block for EV batteries.”
The automaker applied for Texas permits for its facility last year, but it’s unclear when the facility will open, according to Reuters.
According to Benchmark statistics provided by the wall street journal, raw materials account for up to 80% of the cost of a lithium-ion battery, which is now double what it was in 2015. Materials for the battery cathode, such as lithium, cobalt, and nickel, have grown over 150 percent combined over the previous year.
GM’s Strategy
In response to the anticipated shortages, GM announced last week a multi-year sourcing agreement with Glencore, under which Glencore will supply GM with cobalt.
Cobalt is an important metal in the production of EV batteries, and the cobalt processed from Australia will be used in GM’s Ultium battery cathodes, which will power electric vehicles such as the Chevrolet Silverado EV, GMC HUMMER EV, and Cadillac LYRIQ, according to a GM press release.
Ash Lazenby, Glencore U.S. cobalt marketer, and trader said commodities such as cobalt that are “future facing” play a “pivotal role in decarbonizing energy consumption and the electric vehicle revolution.”
Cobalt is known for its heat-resistant properties and is added to lithium-ion battery cathodes to improve energy density and battery longevity, according to GM.
By the end of 2025, GM plans to have the capacity to build 1 million EVs in North America and has announced a series of actions to create a “new and more secure” EV supply chain, including projects that target key EV materials and components:
So, how is Rivian planning to tackle this problem?
Rivian’s Strategy
Rivian’s strategy for securing battery cells is diversification. Diversification in terms of supply, battery technologies, and chemistries used. The automaker’s plans go further by finding multiple suppliers and structured co-investments with partners toward dedicated capacity and, eventually, building cells internally, he said.
The 260 Mile Rivian Variant
One of Rivian’s strongest defense against the battery shortage is its 260-mile dual motor options for its R1T and R1S electric adventure vehicles.
Rivian plans to use new types of battery cells and its electric trucks moving forward. These include cells made with lithium iron phosphate or LFP chemistry for its standard range vehicle such as the dual motor 260-mile variants. On the higher end, high nickel chemistry solutions will be used to attain longer ranges.
These two battery technologies will be applicable to every Rivian vehicle such as the Amazon delivery vans the R1T pickup truck and the R1S SUV. Rivian brought these resolutions to light at its 2021 fourth-quarter shareholder and earnings call it held a couple of weeks ago. This new decision will provide a lot of positive leeway for the automaker.
Tesla has found much success implementing the same strategy for its offerings.
LFP battery cells re generally cheaper than the more premium nickel cobalt aluminum oxide cells because they do not require any nickel or cobalt as the name suggests. This means it is less expensive seeing how the prices of cobalt and nickel are on an ever-upward trend not to talk about supply availability.
This problem is particularly made acute for Rivian because it’s a new automaker, an,d unlike Tesla, it will take a lot of time and effort to create and establish connections or ties with the suppliers of these raw materials or batteries.
Further, Rivian’s previous attempts to secure a competent battery supplier have not yielded much fruit.
Rivian’s Supplier Partnership endeavors
Rivians talks with Samsung SDI was showing a bright future for the partnership. The talks even made Samsung SDI consider building a production plant at Rivian’s doorsteps in Normal but the deal fell through at the last minute leaving Rivian stranded. I think Rivian’s demands for that partnership were completely unreasonable and kept Samsung SDI at a complete disadvantage in the long run.
Rivian is however on the road to recovery from that breakup and is currently looking for new partners. A few months ago, reports streamed in that some executives of rivian took a trip to Korea.
The executives’ visits to South Korea were in an effort to determine potential locations for the development of a battery production pilot line.
The battery pilot line would be used for research and development purposes as well as for conducting various tests. Rivian executives who made repeated trips included cell mixing manager Johnson Mark, senior director cell engineering Victor Prajapati, and senior engineer Park Ki-Tae.
We are still waiting to see any fruits from that trip.
