energy insights

EV Makers, Consumers Already Feeling Supply Chain Pinch

Have you ever left for a picnic and got halfway to the lake before realizing you didn’t bring enough sandwiches? Remember how disappointed all those kids in the back of the van were when you broke the news?

That’s how Ford CEO Jim Farley may be feeling about his company’s exciting new F-150 Lightning electric pickup, which is scheduled to go on sale this spring. Like those kids in the back of the van, many of his buyers are going to be disappointed when they find out there aren’t enough batteries for all the pickups on order. Farley has capped production at 200,000 trucks, and it sounds like he’ll struggle to fill those orders unless he finds a reliable battery manufacturing source.

The automotive world has been complaining about a semiconductors chip shortage for almost two years, but Farley says semiconductors are yesterday’s news.

“The issue is batteries. That’s what we have to solve,” Farley told CNBC in December.

He says his company is completely oversubscribed with its battery electric vehicles, and while Farley may be feeling some frustration right now, he’s not the only one. The industry has worried about a potential battery shortage for a while, but it is happening sooner than expected because of booming demand.

There’s no doubt that Ford will overcome the shortage, but it may not be until the battery manufacturing plants the company is building are up and running a few years from now.

Along with Ford, many of the nation’s largest automakers are spending billions to build battery plants in the United States, marking a dramatic shift within an industry that has been content to rely on foreign suppliers.

Arun Kumar, an industry consultant at AlixPartners, told CNBC that the electrification of the auto industry is happening rapidly, and he is not surprised to see automakers commit to battery manufacturing. The recent chip shortage showed how tenuous supply chains can be.

“You’re going to see this accelerate even more, in our viewpoint, primarily because localization becomes an important factor, if you really think about producing batteries at scale,” Kumar said.

As auto makers work to overcome the weak link in global battery manufacturing, other problems loom. Their battery plants will still rely on imported materials such as lithium, a commodity largely produced in South America and Australia, then processed in China.

South Korea, one of the world’s top lithium battery producers, sounded the alarm late last year over skyrocketing costs of Chinese-processed lithium and other EV battery materials.

Meanwhile, there is only one lithium mine currently operating in the U.S. as others face headwinds from environmental activists and other groups.

Clearly, Ford and other automakers are facing challenging times as they struggle to feed a hungry EV market, fueled by the Biden administration’s mandate for half of all new vehicles to be electric by 2030.

While auto manufacturers are answering the call, they know the industry will not be secure without a dependable domestic supply chain.

Until that happens, U.S. EV makers could end up like that poor guy in the picnic van with all those hungry kids, heading back to the sandwich shop, and hoping it will be open.