Experts believe a battery shortage is about to slam the EV industry — and Tesla is best positioned to weather the storm
- Some experts believe the auto industry will face a battery shortage in the coming years.
- It could cut global auto production by around 4% per year between 2025 and 2028.
- Tesla is in the best position to weather the storm, experts told Insider.
Automakers are praying for an end to a semiconductor shortage that has slowed their recovery from the COVID-19 pandemic, but there may be another supply-chain problem just around the corner: As electric-vehicle production ramps up in the coming years, there might not be enough batteries to go around.
Limited battery availability has already slowed the production of some electric models. Tesla CEO Elon Musk has said batteries have placed a cap on the EV-maker’s sales growth, and Ford CEO Jim Farley said in October that battery supply was the main constraint on the production of the Mustang Mach-E electric SUV.
And as the auto industry plans to rapidly increase EV production, the problem could become more widespread.
“If we’ve learned anything from the chip shortage, it is that you cannot overstate the supply-chain risks” in the auto industry, said Ram Chandrasekaran, the head of road transport at Wood Mackenzie. “A battery shortage is likely to go down a fairly similar path.”
At the center of the threat is a possible deficit of key materials, like nickel and cobalt, used in the batteries powering many of today’s EVs. When EVs grew to 1% of global auto sales, the demand for cobalt doubled, said Mujeeb Ijaz, the founder and CEO of Our Next Energy, a battery startup whose cells don’t use cobalt or nickel.
“The supply-chain risk associated with cobalt is front and center,” he said. “That’s going to become the problem.”
The Germany-based Center for Automotive Research projects a battery shortage will cut global vehicle production by around 4% annually between 2025 and 2028, peaking at 5% in 2026. That’s slightly lower than the 7% output gap the organization predicts the chip crisis will produce this year.
Automakers that don’t secure enough batteries ahead of time could face more than depressed sales. In 2025, the European Union will start fining automakers that don’t decrease the carbon-dioxide emissions from the new vehicles they sell by 15% from 2021 levels or buy credits from rivals to make up for the deficit.
A battery shortage might not be painful for everyone
The effects of the battery shortage, though, aren’t likely to be as widespread as those of the chip crisis, said Christopher Robinson, a research director at Lux Research who focuses on transportation.
“Whereas I think the chip shortage has more or less impacted everyone across the board, I think there are going to be some automakers that are more prepared for this than others,” Robinson said.
Tesla is the most prepared, Robinson and Chandrasekaran said. The EV-maker has been proactive about securing battery supply. In 2016, it opened a battery factory with Panasonic, and it’s now working on proprietary cells to ease its reliance on suppliers.
“They’re absolutely well ahead of the curve in terms of battery supply,” Chandrasekaran said of Tesla. “They have far more control over their battery supply chain right now than any other automaker.”
Other automakers have followed Tesla’s lead, with General Motors, Ford, and Volkswagen, among others, spending billions on battery factories, forming joint ventures with battery manufacturers, and investing in startups, like QuantumScape and Solid Power, that are experimenting with new chemistries.
“Our goal is to eliminate supply-chain risk and control our own destiny as we rapidly scale our EV volume,” GM CEO Mary Barra said in October.