What Does the Coronavirus Mean for Electric Vehicle Battery Manufacturing?

The coronavirus pandemic is having an immediate impact on our daily lives, causing huge national disruptions, as well as major changes in the daily routines and behaviour of people throughout the world.  However, in addition to these immediate changes, it is already clear that there will be many other longer-term impacts and perturbations to what was the established normal order of life.  This will be particularly true for international trade and manufacturing, especially where product supply chains involve multiple countries and regions of the world.  The lithium-ion electric vehicle (EV) battery is one such example and, even though the world is still in the midst of the ‘corona crisis’ and far from any certain conclusions about the inevitable long-term impacts, it is nevertheless interesting to consider what the implications may be for EV battery production.

In the case of lithium-ion batteries, and many other products, the pandemic will have short, medium and long-term impacts.  As a significant proportion of global lithium-ion battery production is based in South Korea and China, it is not surprising that the virus has already negatively impacted production.  Much of the South Korean production was already being retained internally, causing car makers to further increase their purchases from Chinese sources.  Two of China’s major battery manufacturers are CATL and BYD and the spread of the coronavirus has resulted in reduced or delayed production at factories based in affected provinces.  One estimate is that the virus will result in a drop in Chinese battery manufacturing of ~10% during 2020, which is equivalent to ~26 GWh of capacity.  It is also worth noting that much of the cobalt needed to produce lithium-ion batteries is produced in China and it is reported that there have been production stoppages (although current reserves are high).  However, and more positively, it is now reported that Chinese battery production has started to ramp up again, with longer term production expected to increase hugely.  At the end of 2019, the global number of lithium-ion battery mega-factories expected to be operational by 2029 was 115, with 88 of them being built in China. 

Of course, it should also be noted that the coronavirus has already negatively impacted new car sales, and with both consumer and business confidence expected to remain low this is not likely to change in the immediate future.  Many car manufacturers have now closed their production facilities as a result of the virus, with one example being the Nissan plant in Sunderland where the Leaf EV is produced.  Reduced sales of new EVs will dampen down the demand for batteries.

If the pandemic persists for a long period, there may also be mid to longer impacts on Europe’s defined strategy of proscribing internal combustion engine (ICE) powered vehicles and the relatively rapid transition to EVs.  The current ambitious timescale is part of the broader actions aimed at making Europe carbon neutral by 2050.  With the UK’s challenging commitment to proscribe ICE vehicles in 2035 (and possibly sooner), any impacts on the ability to convert existing factories and install new infrastructure could make meeting this target more difficult.

Finally, the impact of the coronavirus could help countries to learn some valuable lessons, and particularly those that have allowed their important manufacturing sectors to wither while developing an over-reliance on a single overseas supplier country such as China.  The messages seem fairly obvious now but, for the record, they are still worth stating.  The UK and indeed other advanced economies should;

• avoid being dependent on supply chains largely based in one overseas country,
• shorten and diversify supply chains when possible,
• encourage local component manufacturing.

More specifically for electric vehicles, it will be even more important to establish a UK supply of lithium-ion batteries and other key components, especially those that are currently sourced from China.  Further attention and support should also be given to those engaged in end of first life battery processing and recycling activities.  By re-using and then recycling these batteries, the UK could have a large, indigenous source of raw materials to hand for making new batteries, thereby reducing the need for imports and the reliance on sensitive overseas sources.

At the time of writing, there was still much uncertainty and the ultimate impacts may change significantly, depending on the actual magnitude and duration of the pandemic.  However, in terms of the UK, and its drive to become a major player in electric vehicle and battery production, the messages couldn’t be clearer.  If the strategically important lessons are learned and changes are implemented, it could ultimately turn out to be good news for the UK industry.

Written by Martin Goosey, Envaqua Research Ltd