Recalls by GM and Hyundai, shortage in battery supply slowing OEMs’ EV push

GM and Hyundai’s massive recalls for the Chevrolet Bolt (145,000 units), Hyundai Kona EV and Ioniq Electric (82,000 Hyundais in total) over battery fire risk are cutting the already insufficient battery supply capacity even further.

The massive recalls also means that replacement batteries will have to be made, and given the current short supply of batteries, every replacement battery made is one less unit for a new BEV (battery electric vehicle).

Both GM and Hyundai have been receiving a lot of flak for poor quality of the high voltage batteries fitted into their electric models. The affected batteries were made by LG Chem.

Hyundai, on its part, has already stopped selling the Kona EV in Korea, focusing only on the Ioniq 5.

The problem with the battery fire risk is made more complicated because unlike a petrol-powered car, fires involving electric vehicle batteries cannot be easily doused off. Even if firemen had put out the fire, the battery could ignite once more hours later, as the short circuit cascades from one cell to another.

In one highly published case in the US, the same fire department was called in twice to put out fire on the same Chevy Bolt. At their second attempt, the fire department couldn’t do much other than dousing it with everything they had, but the car kept smoldering for 4 hours.

In another case, the fire department had to keep dousing a burning Bolt’s battery for half an hour, and had to use hi-tech heat sensing camera to tell if the battery is going to catch fire again.

As part of the European Commission’s Fit for 55 package to reduce CO2 emissions by 55 percent by 2030 (compared to 1990 levels), and to achieve carbon neutrality by 2050, nearly every major car maker have announced their plans to phase out combustion engines and replacing it with battery-electric vehicles, usually in the period between 2030 and 2035.

This target set by car makers are made under the assumption that the world’s battery manufacturing industry has the capacity to support this ambition, and mines mining the necessary rare earth metals to make batteries can keep up – which they can’t.

A report by the Financial Times say shortage in lithium carbonate – an important raw material used in batteries – has caused prices to double in this year alone.

Separately, a study sponsored by Sweden’s ABB, which also makes EV charging equipment, concluded that demand for xEVs will grow by 6 times by 2030.

“Demand for other home, consumer and energy storage products will also increase the need for gigawatt hour capacity. Battery production will thus need to increase faster than EV sales volumes would suggest,” said ABB.

Also read: BEV vs FCEV: Hyundai-Kia explains why Mercedes, Tesla, and VW are wrong

Battery manufacturers have already outlined their expansion plans, which ABB says is around 80 new Gigafactories within the next 10 years. In theory, there is enough capacity to meet the demand.

ABB says battery demand will rise from 330 GWh in 2020 to 2,180 GWh in 2030, battery production capacity will rise in the same period from 450 GWh to more than 2,857 GWh.

However, ABB cautions: “Theoretical maximum capacity of battery plants is rarely achieved as a result of technical and logistical issues. For example, there may be a slowdown due to a shortage of cobalt, cathodes or quality control issues, which could mean that not all cells produced will be viable. A rule of thumb is that a realistic production output is around 70% of the stated maximum capacity.”

It also adds: “There is no guarantee that the announced gigafactories will all become reality, nor that the ambitious battery capacity targets that many battery suppliers have set will be achievable. These factories, after all, require tremendous capital investment, and they are dependent on fast-changing technology. The profitability of such operations is also far from a certainty. And yet, the demand for this capacity is set to grow exponentially.”

The Financial Times confirmed the low profit margins for batteries, which is a bit counterintuitive given how batteries are becoming the new oil. It says LG Chem’s profits on its BEV batteries is a mere 1.4 percent, while Panasonic, which supplies to Tesla (and Toyota hybrids), has been making losses in three of the last four years.

Rising material cost and the pressure the keep BEV prices is why battery manufacturers are not making money.