Demand for lithium-ion batteries grew steadily over the last two decades as personal electronics became widespread, but is now expected to rapidly increase as BEV sales grow. As the automotive industry transitions to widespread electrification, battery supply strategies will become a key differentiator among players.
Toyota has been slower than other automakers to introduce battery-electric powertrains, mainly due to its existing infrastructure being geared towards building hybrid-electric vehicles. However, as other OEMs have begun to show their cards, revealing ambitious multi-billion-dollar battery supply deals, Toyota has begun to launch its own BEV strategy. This will be spearheaded by the bZ series, with the first model – the bZ4X electric SUV – due to launch in mid-2022. Toyota aims to offer 15 battery-electric models by 2025, with seven in the bZ series. Lexus, Toyota’s premium arm, launched the UX 300e battery-electric SUV in early 2021, based on a modified version of the TNGA-C platform shared with the Prius and Corolla.
To build that many EVs, the automaker will need a reliable supply of batteries to power them. This is where Prime Planet Energy & Solutions (PPES), Toyota’s joint venture with Panasonic formed last year, comes in. The JV was established to build out the two companies’ Li-ion battery production capacity and builds on a relationship formed with their existing Primearth EV Energy company, which mainly built nickel-metal hydride cells for Toyota’s hybrid vehicles.
On 4 October, PPES signed an agreement with BHP, the world’s second-largest mining company by revenue, for the supply of nickel sulphate – the basis for the nickel present in the cathode of most Li-ion battery cells. No details were given on the scale of the supply arrangement but the raw material will be supplied from BHP’s new Kwinana plant in Australia, which is expected to produce 100,000 tonnes of nickel sulphate per year at full capacity – estimated to be enough for up to 700,000 electric vehicles. BHP is preparing itself for a rapid increase in demand for nickel, estimating that the growing battery sector will see demand grow by 500% over the next decade.
Leading premium battery-EV developer Tesla has already inked a similar deal with BHP in July 2021. Again, no details were confirmed about the size of the deal but some analysts are estimating it could be around 18,000 tonnes per year – enough for more than 125,000 vehicles using BHP’s estimates.
Tesla’s CEO, Elon Musk, noted on Twitter in February 2021 that nickel supply was a concern for the automaker because it could limit its ability to scale Li-ion cell production. This led Tesla to announce in the same month that its more affordable Standard Range Model 3 and Model Y vehicles would shift to a lithium-iron phosphate (LFP) cathode – this omits the nickel of standard cathode chemistries, bringing the cost down and actually improving its safety performance, though at the expense of energy density and low-temperature performance. LFP cathodes had already been used in Tesla’s Standard Range vehicles made in China, but will now be expanded to its US range, too.
Not to be outdone, legacy automakers have also been securing battery raw material supply. In June 2021, Volkswagen and Daimler launched The Responsible Lithium Partnership with German chemical giant BASF and ethical smartphone maker Fairphone. The partnership was created to investigate the impact of mining lithium salts in Chile’s Atacama desert. While the deal doesn’t include an agreement on lithium supply, it is intended to ensure the ESG credentials of any future lithium-extraction operation in the area are in line with the automakers’ own stated environmental goals.
BMW has also made moves to secure raw materials for EV batteries. This includes a December 2019 deal with China’s Ganfeng Lithium valued at EUR540 million, which will supply all of the automaker’s lithium needs until 2024. Later, in July 2020, BMW signed an agreement with Morocco’s Managem Group worth EUR100 million for supply of cobalt for battery cathodes – this will supply around one fifth of the automaker’s cobalt through to 2024.
These deals highlight the need for automotive players to look further up the battery supply chain, to ensure they have access to sufficient raw materials to supply the enormous capacity growth needed within the lithium-ion battery sector for the new wave of battery EVs launching in the coming years. While pushing to keep cell costs down and profitability up, automakers must also consider the environmental ramifications of these agreements and aim to reduce its impact as the sector grows.