Trade groups think through tomorrow's supply chain

WASHINGTON — The auto industry's transition to electrification will mean big demand for electric vehicle batteries and the critical minerals needed to produce them.

But when it comes to building the supply chain of the future — especially one that positions the U.S. as a manufacturing leader — EV stakeholders face multiple issues in developing strategies to streamline access to raw materials while upholding rigorous environmental and labor standards and supporting domestic production and jobs.

"How do we think about the supply chain distribution and how that should transition and change to support electric vehicles?" asks Ben Prochazka, executive director of the Electrification Coalition, a trade group focused on expanding EV adoption.

"Obviously, there's a lot of work around battery manufacturing and mineral processing that needs to be thought through."

By 2030 — when President Joe Biden wants half of all new passenger cars and light trucks sold in the U.S. to be zero-emission — the auto industry will have invested half a trillion dollars in electrification, according to the Alliance for Automotive Innovation. Many of that group's members, including Ford Motor Co. and General Motors, are forming partnerships with battery suppliers and other EV-related companies in North America as they seek to gain a foothold in a more localized battery supply chain and reduce U.S. reliance on countries such as China.

"We have to get supply chains right, just as we have to get infrastructure right," said John Bozzella, CEO of the alliance. "If we're going to produce affordable EVs that benefit American consumers, support American auto workers and help the U.S. economy, this is a required condition for success."

But how does the industry attain the future supply chain it needs — one that is "resilient, robust and regional," in Bozzella's description — given that many of the materials necessary to build batteries are not currently produced in the U.S.?

It starts with industry and company leadership — and strategic partnerships, he told Automotive News.

"You're seeing companies innovate and develop not only advanced technologies and new zero-emission vehicles, but also develop the partnerships and business relationships necessary to be able to build out that supply chain," Bozzella said. "So partnerships between auto manufacturers and battery producers and all of those supply chain partnerships virtually back to the mine mouth."

This month, Stellantis said it has secured a supply of lithium through a 10-year agreement with Controlled Thermal Resources Ltd., which operates in California's Salton Sea. That follows similar deals announced by Ford, GM and Tesla as global automakers rush to cement partnerships, joint ventures and the like with crucial EV-related businesses.

For suppliers, particularly those specializing in parts for internal combustion-engine vehicles, they'll need to address the long-term viability of their businesses, according to Julie Fream, CEO of the Original Equipment Suppliers Association.

"Many suppliers will need to modify product lines and retrain their existing work force to manufacture the technologies required" for battery-electric vehicles, she explained.

Fream also expects the supply chain of the future to look "very much like today" but with new technology, more transparency through supplier tiers, greater focus on environmentally friendly practices — and also higher costs for both suppliers and their automakers.

Getting there will require industrial policy changes. The automakers of the Alliance for Automotive Innovation are calling for a national strategy that focuses on the permitting of mines as well as processing and refining raw materials, with a domestic supply chain that ultimately brings the materials and components to battery manufacturers "as close to the final point of assembly as possible," Bozzella noted.

"That is our objective," he said. "That's what we need to do, and it is going to take government policy as well as private sector leadership."

The alliance also is taking steps to ensure the supply chain of the future achieves a circular economy. In May, the group released an industry-created policy framework on reusing, repurposing and recycling the lithium ion batteries used in EVs. It believes its proposals will help sustain a domestic circular economy for batteries, create manufacturing jobs, boost U.S. energy security and reduce reliance on critical mineral imports.

The Suppliers Partnership for the Environment, a collaborative group whose members include global automakers and their suppliers, also has been working to solve many future supply chain challenges with a focus on sustainable operations and materials.

"Electrification is the 'du jour' right now," said Kevin Butt, chair of the partnership's board of directors. "But it's bigger than that. There are unintended consequences … because now we've got all these raw materials that we're extracting from the earth, and then we've got all these batteries we have to deal with at the end of it. How do we do that in a responsible and sustainable way?"

The group is meeting on a quarterly basis to discuss the new concerns and carve out a plan. Its efforts have resulted in the publication of several industry guidance documents, including one from May on regulations governing how EV batteries are shipped around the U.S.

"We're a 'do' group. We don't just sit around and pontificate on the issues," said Butt, who also is senior director of environmental sustainability at Toyota Motor North America. "We are actually making progress and creating materials, creating guidance documents, that allow us to work more as a collaborative group as opposed to auto companies on their own and suppliers on their own."

One concern for many EV stakeholders is what they perceive as an "over-concentration" of supply chain resources in just a handful of countries — most notably China. China dominates the industry of battery minerals processing and cathode and anode manufacturing, said Abigail Wulf, vice president of critical minerals strategy at Securing America's Future Energy.

"We don't just want to be the assemblers of the future," she said, referring to the U.S. industry. "We want to be making the battery guts — the cathodes and the anodes — and processing the minerals' precursor material."

It's not just a race for the raw material resources, she added, but also "for all of the downstream industries and innovation that rely upon them."

But with China's new position as the largest auto market worldwide, and its lead in the deployment of EVs and in battery production, there will still be some reliance on the country, several industry experts said.

"With China, there will be a level of collaboration on supply chains," Jon Huntsman Jr., Ford's vice chair of policy, said last month during the U.S. Chamber of Commerce's Global Forum. "They're just too big and too complicated, too well established, to think otherwise."

Wulf said support through grants and loans at the federal level will be crucial for U.S. success in fostering new supply chain industry. She cited provisions in the bipartisan infrastructure law that earmarked more than $7 billion for the battery supply chain, including producing and recycling battery-critical minerals.

But that funding won't be enough to get U.S. industry to scale, she noted.

"To build one processing facility, it costs anywhere from hundreds of millions of dollars to $3 billion — and we're going to need about five of those," Wulf said.

Wulf's group is pushing for policies that focus on using only materials that are sourced using the highest environmental and labor standards and calling for action plans with allies such as Canada.

The group also is advocating for public-private partnerships between automakers and the government, as well as a consortium cost-sharing initiative to build processing facilities in the U.S., and other efforts to make materials processing cheaper, faster and cleaner.

"This isn't just about EVs," Wulf said. "This is about everything — the greater energy transition from a fossil fuel-based economy to a minerals-based economy.

"And so eventually, yes, we're going to have to stick some shovels in the ground here."