Supply Chain Struggles: The EV Boom’s Hidden Challenge

The rapid rise in demand for electric vehicles (EVs) is outpacing supply chains, threatening to hinder the world's transition to a greener future, according to a recent report by ING. As governments around the world push for net zero emissions, the demand for critical raw materials used in EVs and renewable energy technologies has surged, leading to concerns about supply chain sustainability.
The ING report highlights that global sales of electric vehicles skyrocketed in recent years, with 14% of all new cars sold in 2022 being electric, up from 9% in 2021 and under 5% in 2020. The momentum is expected to continue, with nearly one in five new cars sold worldwide projected to be electric this year. Despite this impressive growth, the transition has only just begun, with electric vehicles comprising just 2.2% of the total car fleet in 2022.

One of the main challenges lies in securing a consistent supply of critical raw materials required for EV production, such as lithium, cobalt, and nickel. The demand for these materials has surged as the EV market matures, with automotive lithium-ion battery demand jumping by 65% to 550 GWh in 2022, driven primarily by EV sales growth. However, supply chains have struggled to keep up, resulting in potential shortages of these essential components.

Moreover, the report emphasizes the need for diversification and increased investment in battery manufacturing and raw material production. Currently, 60% of lithium, 30% of cobalt, and 10% of nickel demand is attributed to EV batteries, a significant increase from just five years ago. To meet the demands of the green transition and reach projected growth targets, production of critical raw materials must increase by several folds.

The potential consequences of supply chain disruptions are significant. Squeezed supply chains and looming shortages of key metals not only pose a risk to the energy transition but also to the broader global economy. As EVs play a crucial role in achieving carbon reduction goals, addressing these supply chain challenges becomes paramount.

While the report identifies the challenges posed by the current situation, it also underscores the opportunity for sustainable growth and investment. As governments, industries, and investors recognize the urgency of securing critical materials, efforts to strengthen supply chains and boost production could lead to a more resilient and sustainable energy future.

As the world races toward a net zero future, addressing the gaps in EV supply chains will be crucial to ensuring the continued growth and success of the electric vehicle market. The ING report serves as a wake-up call, urging stakeholders to collaborate and invest in the necessary infrastructure to pave the way for a cleaner and more sustainable transportation sector.

Source: Supply chain challenges signal a bumpy road ahead for electric vehicle adoption | ING

A line graph titled "Expansion of EV sales is set to soar by 2030" showing an upward trend in the share of electric vehicle (BEV and PHEV) sales from 2016 to 2024. China leads, followed by Europe, global total, and the US, with projected increases to 32%, 26%, 17%, and 10%, respectively.
Source: Supply chain challenges signal a bumpy road ahead for electric vehicle adoption | ING
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