Toward security in sustainable battery raw material supply
he net-zero transition will require vast amounts of raw materials to support the development and rollout of low-carbon technologies. Battery electric vehicles (BEVs) will play a central role in the pathway to net zero; McKinsey estimates that worldwide demand for passenger cars in the BEV segment will grow sixfold from 2021 through 2030, with annual unit sales increasing to roughly 28.0 million, from 4.5 million, in that period.1 For producers of battery cells and raw materials, ensuring a reliable and ample supply of sustainable and affordable materials will be crucial to their competitiveness, the ongoing rollout of BEVs, and the net-zero transition overall.2
The industry is likely to confront persistent long-term challenges; it will need to address them to keep up with demand in 2030. This article explores those challenges—namely, reducing carbon emissions across the value chain and related adverse effects on nature and communities—and the actions that battery materials producers can consider to overcome them.
The shift from internal-combustion engines to battery electric vehicles is greatly affecting the materials industry. The rise in battery electric vehicles will lead to an increase in demand for battery materials. For example, battery electric vehicles are typically 15 to 20 percent heavier than comparable internal combustion engine vehicles,3 with a large share of the additional weight coming from battery applications. Despite this forecasted rise in battery materials demand, 2024 has been a challenging year for the industry, due to the slowdown of economic growth and pressure on price levels, especially for battery materials such as nickel and lithium.
However, to meet net-zero transition goals, companies that produce and consume battery materials will need to balance the three dimensions of the “materials trilemma”4 by ensuring availability (meeting growing demand needs and ensuring regional security of supply), affordability (maintaining competitive prices to ensure affordability of materials and the products and applications that are built from those materials), and sustainability (complying with or exceeding the environmental, social, and governance (ESG) standards and requirements set out by governments, customers, and industry associations alike) of materials.
After a focus on tailpipe emissions, automotive OEMs are now starting to move toward reducing their Scope 3 emissions from material usage, which contribute a large portion of what batteries emit.
Within the battery market itself, the choice of battery chemistries determines demand for materials, driven by the need to balance battery performance and cost. There are currently two broad families of battery chemistries—lithium nickel manganese cobalt oxide (Li-NMC) and lithium iron phosphate (LFP). More manganese-rich battery technologies are also emerging.5 These chemistries vary with respect to material content and offer manufacturers the option of adjusting performance or cost based on the actual composition of the chemistry. With the attention given to Scope 3 reduction and sustainability at large, battery materials sourcing is an important decision for battery producers and automotive OEMs.
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