Three global trends that will affect the electric car transition in 2022

The year 2022 promises to be a big one for electric cars, as countries push on to reduce carbon emissions on the path to net-zero by 2050.

Electric cars, and also hydrogen-powered vehicles to an extent, will play an important role in reducing transport sector emissions. According to the latest EV outlook report from BloombergNEF, 60% of new car sales worldwide must be electric by 2030 if a net-zero scenario is to be achieved.

To put that in perspective, that’s approximately 40 million cars a year according to Statista – 40 times the EV production output of pioneering electric car maker Tesla in 2021.

And though Tesla is planning to increase its production capacity of both electric cars and battery cells to power them, it can’t, and won’t, be doing it alone.

European auto group Volkswagen AG, which holds VW, Audi, Porsche, Cupra, Seat, Lamborghini, Bentley, Ducati and Skoda under its umbrella, plans to sell 1 million EVs in 2021, and become the global market leader by 2025.

Other carmakers in Europe are also having to toe the line to meet strict emissions limits or face big fines (as VW did in 2020 after its ID.4 launch was delayed by software issues) – although, according to clean transport lobby group T&E, some are exploiting loopholes to delay the switch to clean transport.

Meanwhile in China, EV giants like BYD and the joint venture between General Motors, SAIC and Wuling have the Asian economic giant pushing 3 million units by the end of the year. We’re likely to start seeing more budget electric cars from the likes of BYD and Great Wall Motors in Australia in 2022.

The continued spread of electric cars is certain, but there are a number of snags that could hold back record EV sales growth.

Global chip shortage and supply chain issues

The global semiconductor shortage and other supply chain issues have already seen carmakers adopt tactics to continue production amid a reduced supply of chips and parts needed to make cars.

Some simply cut production; according to JATO, the auto industry at large sold 2.4% less cars than in 2020 and 27% less than in 2019.

Others rejigged their vehicle mix to concentrate on larger vehicles that would yield higher returns per unit, which has also had the effect of ensuring they meet strict emissions limits in Europe by making more electric vehicles. Volkswagen for example halted production of its Golf for weeks at a time, as drivers turned increasingly to its range of SUVs, or to its recently introduced ID.3.

While the global chip shortage and other supply chain difficulties affect the wider auto market (and other industries for that matter), how carmakers can respond will determine how well they ride the crisis.

Tesla is a prime example of how to do this: instead of cutting production, it relied on its agile approach to software, securing chips from new suppliers and rewriting the code to integrate them with its electric cars. While the broader auto industry saw drops in sales, Tesla doubled its output from just shy of 500,000 units in 2020 to 936,000 in 2021.

The cost of battery materials as demand for resources heats up

Battery making costs are expected to fall below $US100/kWh by 2024 according to BloombergNEF, but the rising demand for the materials to make them could see a hiccough in reaching this magic number in 2022.

Lithium prices are already soaring, having skyrocketed some 540% since the start of 2021 – and they have “much further to run”, says Credit Suisse analyst Saul Kavonic (via AFR).

Another material used in lithium-ion batteries, but one that does not hit headlines quite as much as lithium, cobalt and nickel, is graphite. A lithium-ion battery contains about 20-30% graphite, but there is a global shortage looming.

This shortage is the key reason interest in synthetic graphite producers like Australia’s Novonix has increased in past months. With its ASX share prices up 342% in the past year and readying to list on the US Nasdaq stock exchange, the company – which is headed by battery scientist Chris Burns and counts Tesla lead battery researcher Jeff Dahn amongst its advisors – says it is currently the only supplier able to provide large volumes of synthetic graphite for use in battery anodes in the US.

How soon it can do that though is the question. On Thursday, it expanded upon its recent deal with multinational energy company Phillips 66 to make anodes in the US, inking a two year deal with an option to extend one extra year. With a production facility based in Chattanooga, Tennesee, it is eyeing 10,000 metric tons of the stuff per year by 2023.

In the meantime, battery makers are clambering to secure graphite supply – Tesla for example has just inked a deal with Australia’s Syrah Resources for natural graphite from its Mozambique mines and processed in Lousiana, US.

Likewise, prices are on the up having increased 20-25% in the past year according to Stockhead, which also notes cobalt price increases of 11.5%.

Charging infrastructure rollout

Whilst many electric car owners are likely to be top them up at home overnight much like a mobile phone, that’s not always possible or practical, and the rollout of charging infrastructure will continue to charge forwards in 2022.

But demand is already outstripping supply, says Tritium CEO Jane Hunter. And the ability to ramp up production to fill that demand is tied in with global supply chain and logistics issues.

The Australian-based company, which has an estimated 15-20% market share, has just listed on the tech-focused Nasdaq and has all shoulders to the grindstone to fill a massive $US82 million ($A113 million) backlog of orders.

Shipping delays have doubly impacted delivery times for the company. In December, Hunter told AFR that transit time had increased from 35 days to up to three months. Tritium has plans to build a factory in Tennessee or Texas by the end of 2022, but we don’t see production ramping up there until 2023 at the earliest.

Article updated to correct Novonix production target from 2023 to 10,000 metric tons.