Examining the Influence of Electric Vehicles on Raw Materials for Batteries in Europe

• The European electric vehicle (EV) market has experienced significant growth in the past decade, with many countries setting ambitious emissions reduction and EV adoption targets. This growth has led to a surge in demand for EV batteries.
• Solid-state batteries are emerging as a promising innovation in the EV battery market. They are seen as a cost-efficient solution while maintaining high energy density.
• Europe is witnessing a significant increase in the construction of gigawatt-scale battery manufacturing facilities. These facilities are essential for meeting the growing demand for EVs in the region and are expected to positively impact the EV battery industry.

The EV market has seen massive growth in the past decade, as most countries now have emissions reductions and EV phase-in targets in place. This has led to the EV market seeing exponential growth in demand and supply. Batteries are a vital component of EVs, and the rise in EV demand has increased EV battery demand. PTR estimates more than 250 million EVs to be active globally by 2030. To cater to this increasing demand for EVs, projects catering to the production side of EV batteries have also witnessed a boost.

Europe has been at the forefront of EV development and has a sizable number of EVs currently active in the region. The increase in demand and volatile import costs due to raw material bottlenecks have led the EV industry in Europe to consider going for a localized battery supply chain. All aspects of the current EV battery market must be overviewed to analyze this decision. The article discusses the influence of passenger EV targets in Europe on passenger EV batteries only.

Europe EV Targets and Influence on EV Batteries

 

Europe is the driving force in electric mobility, spearheading a revolution that transcends traditional transportation norms. As countries across the continent embrace sustainable development goals, the EV market has emerged as a nucleus of change. Leading European markets, such as Germany, France, and Norway, have set ambitious EV adoption targets that extend well into the next decade. These goals, often accompanied by robust incentives, propel a shift towards cleaner transportation.

Germany has an active target of 15 million EVs on the road by 2030. In the UK, automotive manufacturers have to guarantee that a minimum of 22% of new vehicle sales within the UK are zero-emission vehicles (ZEVs). This requirement will help reach an 80% threshold by 2030. As part of France's Industrial Revival Plan, approximately USD 4.28 billion has been allocated for the transport and mobility sector. The plan sets a target of producing 2 million electric and hybrid vehicles.

Norway also has an ambitious EV target, with the Norwegian Parliament having a national goal that all new cars sold by 2025 should be zero-emission (electric or hydrogen). Italy has a target of having 6 million EVs active by 2030. The Netherlands announced a target in 2019, entailing 300,000 EVs to be active in the country by 2030. Spain has a target of achieving 5 million EVs by 2030.

As these nations stride towards their ambitious EV adoption goals, the market for EV batteries is flourishing. This leads to a need for expansion of battery production, offering promising opportunities for battery manufacturers.

 

Figure 1: EV Adoption Targets of Multiple European Countries.

Source: PTR Inc.

 

 

Battery chemistries in Europe

 

The heart of every electric vehicle resides in its battery chemistry. As a hub of innovation, Europe showcases a diverse landscape of battery technologies. Notably, Nickel Manganese Cobalt (NMC), Lithium Iron Phosphate (LFP), and Nickel Cobalt Aluminum (NCA) chemistries have gained prominence. These chemistries have unique characteristics, striking a delicate balance between energy density, durability, and cost-effectiveness. This mix of chemistries caters to diverse consumer needs and paves the way for continuous innovation.

 

Figure 2: Market Shares of Battery Chemistries in Europe in 2023.

Source: PTR Inc.

 

Solid-state batteries offer a new opportunity in the EV battery market. The early market data for the technology shows that solid-state batteries have the potential to provide a cost-efficient solution for EV batteries while maintaining a high energy density.

The figure below shows the global pricing for various battery chemistries, highlighting the edge solid-state batteries offer. As Europe is the source of battery innovation, the region is poised to be among the first to integrate solid-state batteries into their EV market.

 

Figure 3: Global Pricing for Various Battery Chemistries.

Source: PTR Inc.

Raw Materials Outlook

 

The electric vehicle ecosystem's vitality relies on the availability of essential raw materials. The increased demand for EVs has led to a direct increase in raw material demand to cater to the EV battery market. Critical raw materials such as cobalt, a crucial component of cathodes, are the subject of intense scrutiny due to their supply chain complexity. While attempts have been made to reduce cobalt dependency, its strategic sourcing remains pivotal. Lithium, the lifeblood of EV batteries, faces its challenges with fluctuating supply and demand dynamics. Nickel is another integral element for high-energy-density cathodes. Manganese and graphite, though less in the spotlight, are indispensable to battery anodes. The emergence of new chemistries, such as solid-state batteries, could remove some of these raw material concerns, yet challenges in scaling up production persist.

The largest lithium production capacity within the EU is in Portugal, which has 60,000 metric tons in reserve capacity. At the same time, France and the Czech Republic each have 30,000 metric tons in reserve, while Finland holds 15,000 metric tons and Austria holds 10,000 metric tons. The European Commission launched the Critical Raw Materials Act in March 2023. The Act is intended to reduce the administrative burden and simplify permitting procedures for critical raw materials projects in the EU. Before the Act, Europe's primary source of raw materials was China. The new Act aims to help use local resources to create a sustainable local ecosystem of raw materials to reduce reliance on external imports.

Europe is also a hub for gigafactories which strengthens the manufacturing side to meet the increasing demand. Around 60+ new gigawatt-scale battery manufacturing facilities are planned across Europe to help improve the supply of batteries. This will directly affect the EV battery industry as these factories will aid the uptake in EV adoption. The figure below shows the massive expansion of manufacturing facilities expected in Europe in the next few years, ensuring that the targets set by the various European governments can be backed from the supply chain perspective.

 

 

Figure 4: Installed Base of Battery Gigafactories in Europe.

Source: PTR Inc.

Looking Ahead

 

In the wake of the growth in the electric vehicle market, Europe is driving a revolution, showing great promise for the cause. As nations embrace sustainable goals, the demand for EVs has surged, spurring a parallel rise in the demand for EV batteries. Ambitious targets set by key European markets like Germany, the UK, France, and Norway underscore this transformation, moving the industry towards cleaner mobility. With innovations like solid-state batteries on the horizon, Europe stands at the forefront of technological advancements.

New developments in the industry, such as the battery passport, offer solutions for raw material sourcing and internal components of batteries. This improves performance to aid the efficiency of the current batteries. Challenges in raw material supply are being met with strategic solutions, such as local reserves and gigafactory installations. This coordination of future EV targets, optimized battery technology, and resource resilience shows Europe's pivotal role in propelling the electric revolution forward.