The growing demand for electric vehicles is upending the automotive supply chain at a time when it was already stressed by the coronavirus pandemic, rising material prices and semiconductor shortages.
The industry's push for new technologies and solutions is enormous, and R&D work is underway around the industry.
During 2019 and 2020, the world's top 20 automakers alone spent nearly $94 billion on R&D as EV product plans take hold, according to a report last year by the financial firm BDO.
Stellantis CEO Carlos Tavares has warned suppliers that they, too, must be prepared to absorb the cost of the technological transition.
"In this transformation of the industry, it's not only about the OEMs," Tavares said during a late February earnings call. "It's also about the supplier base."
The need is for innovations in motors, batteries, materials and production processes to get automakers up and running at mass-production scale in the new EV world.
It is a bumpy road.
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Two rising EV startups, Rivian and Lucid, have seen their high-flying stock prices plummet as they struggle to produce their launch vehicles without enough parts to meet their original production targets.
Rivian CEO RJ Scaringe predicted on a March earnings call that the company expects to build about 25,000 of its R1T pickup, R1S SUV and EDV delivery vans this year, half the number it could make at its Normal, Ill., assembly plant if it had enough parts in the pipeline.
The story is similar at Lucid, which cut its production estimate for its Air sedan to about 14,000 vehicles this year from a previous target of 20,000.
"We've got about 250 suppliers worldwide, notionally about 3,000 parts. And this has been really a phenomenon of just a small handful of our 250 suppliers," CEO Peter Rawlinson said on a February earnings call.
Rivian and Lucid have said that one solution to their supplier challenges is to bring more parts production in-house. Rivian will develop its own electric motors for future versions of its vehicles, and it even is considering getting into the battery business, Scaringe said. Lucid didn't detail which parts it could make itself in the future.
The troubles at Rivian and Lucid illustrate a trend for all makers of EVs. Lithium supplies, rare-earth metals, magnets for electric motors and battery assembly are now as important to their future as great vehicles and efficient assembly plants.
"Currently, the raw materials are quickly becoming the bottleneck," said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. "With the gradual growth of the EV market, the supply chain for motors and batteries will grow to accommodate that volume. Commodities such as nickel, lithium and cobalt are poised to slow this growth."
General Motors has formed joint ventures for lithium supply with California startup Controlled Thermal Resources and with LG Energy to make GM's proprietary Ultium batteries.
Automakers all over the globe are forming alliances with lithium miners and battery makers, and even locking down supplies of rare-earth metals needed for permanent-magnet electric motors, which dominate the industry.
Securing the supply chain as quickly as possible will be key for automakers if they are going to compete in an EV market that will soon become extremely competitive, Fiorani said. He cited the non-EV example of Ford's switch to aluminum for its F-150 pickup, the bestselling vehicle in the U.S.
"Like Ford's plan to secure sourcing of aluminum for the F-Series years ago, forward-thinking EV makers are locking in their own supply of these key ingredients, and that could leave other automakers short of these important materials," he said.
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