Andrew Miller, Chief Operating Officer at Benchmark Mineral Intelligence, joined Closing Bell to discuss the warning from Rivian's CEO about a possible EV battery shortage due to lack of access to key metals like lithium.

Closing Bell

Looming EV Battery Shortage Could Have Major Effects on Auto Industry

Okay well, supply chain constraints have taken a toll on just about every industry this past year. And now Rivian Ceo is sounding the alarm about a looming E V battery shortage, that could be a major roadblock for the auto space. It's all due to dwindling supply of key metals like cobalt lithium and nickel, which are vital to battery making shortage would spell trouble for an industry that has made a major shift tv production and sales joining me now is Andrew Miller Ceo of benchmark mineral intelligence, the price reporting agency focusing on lithium ion batteries and the E V supply chain. Andrew. It's good to see you. Does it look like there will be a battery shortage in the near future or is this an issue adjust characteristic of Rivian? No, so this isn't unique to Rivian. I think fundamentally what you're seeing at the moment in the market is not necessarily a shortage of batteries in the industry, but a shortage of the raw materials going into those batteries. So fundamentally you've seen multi billion dollar investments from automakers around the world now in the push towards electrification that hasn't yet been matched in the raw material capital of going into raw material markets. So fundamentally with the lead time required to start up new lithium cobalt nickel operations around the world being typically a multi year process. Fundamentally a lot of the electric vehicles that are scheduled to reach the market over the next few years are going to face serious challenges as the ceo of a price reporting agency. How are you seeing prices impacted by this? Yeah, absolutely. So, you know, prices have shot up for a lot of your key battery or materials, most notably if you take lithium, which is the mainstay across the battery's going into your electric vehicles. We've seen increases upwards of five times in the price of lithium since the beginning of last year. So fundamentally, when you talk about electric vehicles being able to meet the price of your traditional combustion engine vehicles that is really being challenged by a number of your key input materials shooting up in price. And of course this hasn't just been the case in your batteries. You've obviously seen supply chain issues challenged the cost basis for a number of other key inputs into electric vehicles, but batteries being the key component of an electric vehicle are certainly facing massive challenges, not just from your price rises in lithium, but nickel, cobalt, elevated price and a number of your key battery, raw material inputs, having a substantial impact in the cost of your electric vehicles. Now, how far in the future Andrew are you able to see? And what does it portend about? How long these components will be in little supply? Yes. So, in our forecast, you know, we did forecasting out of 2040 and fundamentally what you see is like I say that the lack of responsiveness from raw material markets hasn't quite been taken into the equation yet from automakers. So when you see your major automakers around the world saying they're going to have, you know, dozens of new electrified models reached the market over the next few years. Fundamentally, what we see from a raw material perspective is that the supply chain just isn't set up to meet that type of demand in the short term. Now, fundamentally, you know, these raw materials aren't aren't scarce. Typically they're pretty abundant, geologically the issue is taking them out of the ground and refining them to the battery grade chemicals and the E. V. Market requires That will happen. And of course higher prices are going to incentivize that to happen at a much faster rate. But fundamentally you can't speed up this process um you know, substantially and it's going to mean that for the next 2-3 years you see a number of these key and put raw materials face significant supply challenges. And then when you look further, you know, if automakers public markets, if the billions of dollars that have gone into the auto sector don't start to go upstream into the raw material markets, then this is a challenge that is going to be continually faced by the industry over the coming decade, interesting. Now, what does this mean for consumers out there? How long might they expect to have to wait for an electric vehicle due to the shortage? Yeah, so this really isn't going to speed up lead times. You know, we've seen, we know Evie consumers have been waiting a significant amount of times. Obviously the chip shortages have led to that. Obviously Covid constraints have led to that. And now you have compounding all of that. You have raw material shortages for the batteries themselves. You know, we do see that this will obviously slow the rollout of VVS to the market, but fundamentally automakers are now committed to introducing certain models over the next few years. So they will be coming. It's just the time and the cost which they reached the market is in question at the moment. And fundamentally, I think that's going to see the number of vehicles reaching the market is going to be, there's going to be a delay in those vehicles reaching their consumers and then fundamentally what our automakers going to have to do in order to continue to roll out these electric vehicles and that will be interesting to see whether that leads to different types of vehicles reaching the market maybe different pack sizes, doing different types of ranges as well. I think these are all going to be things that are under consideration from your automakers as they really push to stay competitive in this market? How much does Russia's ongoing war of Ukraine impact this Andrew and that's the big unknown. Right, When will pulling back down if he does decide to back down? Yeah, absolutely. So from a raw material supply point of view, you know, Russia isn't a key player in the majority of these markets, The one area where there is an exception to that is the nickel industry and particularly the Class one nickel market, where Russia is a substantial player but fundamentally because the midstream of the electric vehicle market still very heavily goes through Asia and particularly china, um it's likely to see a shift in trade flows for the supply chain as opposed to lead to more fundamental shortages. But you know, I think that what all of this speaks to is not just the Russia situation, but situations we've seen across the supply chain for the past, you know, 23 years now it speaks to the issues that automakers are having in terms of building out a new supply chain to supply electric vehicles and doing that in a sustainable way where they can, they know they have the security of supply, they know that the materials are being mined in an ethical manner that meet their sustainability requirements and of course getting those materials to market on time and at the right cost. So while Russia doesn't have a here's the question Andrew, I do want you to finish that thought, but we're running short on time. So I'm just curious to if you have any insight as to which automakers will be impacted the most. Is it these smaller companies like Caribbean does GM for instance have more ability to absorb the supply chain challenge. I think fundamentally it's not an issue of the scale of the automaker, it's how strategic they've been in addressing their supply chains trends. A lot of automakers came into the E. V. World assuming that these materials will just make their way to market to market forces. Would would would solve a lot of these issues. What this is showing is that fundamentally you do need more interaction along the supply chain. And those automakers that haven't made strategic investments up the supply chain are really going to be faced with significant challenges over the next few years. Alright. Andrew, Miller Ceo of benchmark mineral intelligence, Andrew, thank you for joining on this important topic.