Semiconductor supply shortages may foreshadow European car industry battery struggle

The current supply shortages of semiconductors due to the pandemic for the European car industry could be a glimpse of future difficulties the industry will face regarding the secure supply of raw materials for battery production, weekly business newspaper WirtschaftsWoche writes. “There’s a real risk that supply and demand will not be balanced across the battery supply chain,” analyst Daniel Harrison of Ultima Media told the publication, suggesting this may result in production targets not being met. Just four years ago, many German carmakers seemed to have accepted they could not compete with Asian producers on battery production and would instead rely on imports, according to the article. But since then, billions of euros have been poured into EU battery production support programmes and companies have greatly expanded their investments. There are now roughly 50 projects across Europe, with German market leader Volkswagen alone planning six battery cell factories to cover two thirds of its expected demand. This shifts demand down the production chain to raw materials such as lithium, nickel or cobalt, for which price hikes have become common in recent years. Establishing new extraction projects in sourcing states such as the Democratic Republic of the Congo can take years, meaning capacity cannot be readily expanded and the industry might therefore find itself in a situation similar to what it is experiencing right now, with a lack of semiconductors leading to major production cuts. Expanding local sourcing and improving recycling capacities will therefore be necessary for European producers to stay on top of market developments and secure adequate resource supply for their ambitious e-mobility targets, Harrison said.

The rapid increase in e-car purchases in Germany and other countries could thwart existing calculations for the industry's supply, companies already warned earlier this year. But proposed mining projects in Europe to reduce dependence on the growing number of different raw materials needed for the energy transition is facing opposition locally, making the need for circular product concepts that fully exploit recycling potentials more pressing.