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If World's Battery Supply Doesn't Scale Up, Automakers Will Be In Trouble

RACHEL MARTIN, HOST:

The global production of electric vehicles is likely to increase at an astonishing pace. That means automakers need a lot more batteries, and all that demand could mean a bottleneck. NPR's Camila Domonoske reports.

CAMILA DOMONOSKE, BYLINE: Lithium-ion batteries - the kind found in phones, laptops and electric vehicles - they're in pretty tight supply right now. Elon Musk says that's why the Tesla semitruck is delayed. And if it's hard to get batteries now, just wait.

LOGAN GOLDIE-SCOT: We expect lithium-ion battery demand to increase at least tenfold over the next decade.

DOMONOSKE: Logan Goldie-Scot is a clean energy analyst with BloombergNEF. And that's his conservative estimate. He says this explosion in battery demand will be driven by the auto industry. Every major automaker is preparing to switch from gas-powered cars to electric or hybrid ones, and President Biden wants to push the industry to shift even faster. So the world's supply of batteries has to scale up fast, or automakers will be in trouble. Keith Phillips is the CEO of Piedmont Lithium. He's not an automaker, but he's been talking to automakers.

KEITH PHILLIPS: They may have vehicles people want to buy. They may have demand. And they may not be able to produce the vehicles, and it won't be because they couldn't get windshields or steering wheels; it'll be because they couldn't get batteries.

DOMONOSKE: Piedmont Lithium, which will mine the mineral in the U.S., stands to benefit from this explosion in demand because lithium is a key component of electric-car batteries. In years past, a mining company probably wouldn't be talking directly to automakers; they'd sell raw materials to suppliers who would build the batteries, and those suppliers would then deal with automakers. Tesla bucked that trend, and now other companies are following suit, driven by concern over lithium supplies.

PHILLIPS: We're in conversations with everyone in that supply chain - pretty much all of the car companies, battery companies and cathode companies.

DOMONOSKE: BMW and Volkswagen have announced deals with other lithium mines to source raw materials directly. Companies have other strategies, too, like changing the battery technology they use. But fundamentally, the world's capacity to mine for and assemble batteries just needs to scale up dramatically. That will require investment, and some players might be hesitant.

RAM CHANDRASEKARAN: You have to be very confident that the world can make the transition.

DOMONOSKE: Ram Chandrasekaran is the head of transportation at Wood Mackenzie.

CHANDRASEKARAN: One of the battery suppliers might be thinking, hey, I'm not going to invest in making a million gigawatt hours of battery pack because what if your predictions don't come to pass?

DOMONOSKE: A couple of years ago, lithium companies got very excited about electric vehicles and expanded too fast, which made lithium prices collapse. But Phillips of Piedmont Lithium says now automakers are not just predicting an electric future but committing real resources to it. Another difference is that the Biden administration is concerned about battery supply and particularly alarmed by how much the U.S. relies on other countries, like China. Secretary of Energy Jennifer Granholm was on PBS last week.

(SOUNDBITE OF TV SHOW, "PBS NEWSHOUR")

JENNIFER GRANHOLM: Even the guts to the batteries that are in the electric vehicles, they've got critical materials in them that we have in this country, but we are allowing other countries to corner the market on those materials.

DOMONOSKE: But even with automakers and the White House seeking to boost domestic supply chains, it takes time to establish new mines. It takes time to build new battery plants. And it will take time to transition to electric vehicles. The multibillion-dollar question for the auto industry is, will those timelines match up?

Camila Domonoske, NPR News.

(SOUNDBITE OF CAVES OF STEEL'S "RIDE THE IMPLOSION") Transcript provided by NPR, Copyright NPR.

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