Tavares sees looming shortage of EV battery materials

As automakers rush to roll out electric vehicles faster than their rivals, they're also scrambling to build enough plants to make all the batteries needed to power them.

They might not be able to keep up, said Stellantis CEO Carlos Tavares, who last week revealed plans to open a battery plant in Kokomo, Ind., in 2025. It's one of more than a dozen North American battery plants that automakers are in the midst of planning or building.

Yet Tavares said he expects the industry to face a shortage of batteries and raw materials needed for EVs this decade.

At the same time, he's on alert for more disruption on the economic front, saying "the macroeconomic fundamentals that could trigger" a recession are "quite common" to all of the Western economies.

If a recession does emerge, Tavares said automakers simply will have to roll with it.

"We are in the Darwinian world," he told reporters last week. "The guys who survive are the guys that adapt, and we will have to adapt if that reality materializes."

The U.S. and other nations have experienced rising inflation as they recover from the coronavirus pandemic. The Federal Reserve, in an effort to cool down the U.S. economy, raised interest rates by half a percentage point this month in a move that echoes other central banks around the world.

The risk is that going too far in the opposite direction could kick-start a recession. Whether this happens or not, Tavares said, will depend on the skills of the central banks to "fine-tune the magnitude and the speed at which you are going to increase the interest rates."

Tavares said he expects batteries to be in short supply by 2024 or 2025, followed by a deficit in the raw materials needed for EVs in 2027 or 2028.

"The speed at which we are trying to move all together for the right reason, which is fixing the global warming issue," Tavares said, "is so high that the supply chain and production capacities have no time to adjust."

Building out the EV supply chain so that it provides sufficient quantities of affordable materials such as lithium in the time frame automakers are targeting is a significant challenge, said Sam Fiorani, vice president global vehicle forecasting at Auto- Forecast Solutions, which tracks auto production.

"The issue is that there is a shortage of facilities designed to both mine and then refine the lithium," Fiorani said. "Environmental regulations, permitting and facility construction all conspire to lengthen the amount of time needed to deploy new lithium mining and refining facilities. Neodymium and other magnetic rare earths are concentrated in geographic areas and countries where politics interfere with supply."

On the regulatory side, Tavares said he is hoping for stability when it comes to environmental standards. Tavares has been critical in the past of politicians whom he says have goaded the industry to adopt EVs, which are more costly to produce but need to be kept affordable for middle-class consumers.

"Stop playing with the rules," Tavares said. "Leave the rules as they are and let people work properly with a lot of focus and a lot of rigor."

The battery plant that Stellantis is planning in Indiana is a joint venture with supplier Samsung SDI. Tavares said it would be an opportunity for the region to "transform itself into the new automotive world" amid the industry's transition to EVs.

Samsung plans to use its PRiMX technology to produce battery cells and modules for a range of Stellantis EVs built in North America. Stellantis and Samsung will invest more than $2.5 billion in the project, which they said is expected to create 1,400 new jobs in the area. Construction is scheduled to begin this year.

Indiana is offering an incentive package of up to $186.5 million in conditional tax credits, training grants and investments, including funding that would offset the costs of the plant's infrastructure, the Indiana Economic Development Corp. said. Stellantis has a large presence in Kokomo and the surrounding area, having made engines and transmissions there for decades.

Tavares said the production process for battery cells is "very clean" and "very sophisticated."

"It's very precise equipment," Tavares said. "Very different from what we are used to altogether in the automotive world, so it's really a step in terms of technology, process engineering, materials, cleanliness, equipment."

He added that the plant will offer a great learning opportunity for the Kokomo work force. "The profile of people that we will select for this activity, being curious and having a significant learning capability, is going to be a key success factor," Tavares said.