The U.S. has a problem: Countless people want to buy electric cars, but there simply aren’t enough EVs available to go around.
In some cases, waiting lists stretch years into the future, and people are selling used cars for a premium — sometimes at a higher price than they paid at the dealership.
Why is America’s EV supply chain struggling to keep up with demand, and what can be done about it?
The answer to the first question is a lack of batteries. The materials used to make EV batteries are largely concentrated in countries other than the United States. Most of America’s lithium comes from Chile and Argentina, while the Democratic Republic of the Congo (DRC) supplies around 70% of the global supply of mined cobalt. Global supply chain issues can make it challenging to buy electric vehicles in the U.S.
Even if America started mining more of its domestic resources, it would still have to rely on other nations to refine the minerals and turn them into batteries. The U.S. simply doesn’t have the infrastructure to produce its own batteries, which includes multiple components along the EV supply chain, from mining to manufacturing.
Dependence on Foreign Mining
Another reason for the EV supply chain issues: Mining in the United States is much more tightly regulated than in countries like China, Indonesia and the DRC. This is partly why the U.S. outsources the materials needed to make electronics.
Other countries rely on enslaved people and child labourers to work in the mines, many of whom die underground from landslides or asphyxiation in digging up materials for smartphone, laptop and car batteries. It’s cheap and convenient for manufacturers.
However, unravelling the kinks in the EV supply chain — and preventing the horrific conditions that go into mining materials for the so-called “blood batteries” that power electric cars — is not as simple as switching to domestic mining. U.S.-based companies usually face strong pushback against proposed extraction projects since most nickel, cobalt, copper and lithium reserves are close to Native American reservations.
Indigenous people are often hard hit by the effects of mining. The roads ploughed through wilderness areas, streams of greenhouse-gas-emitting trucks and dams swollen with toxic tailings are more than just an eyesore on tribal land. They also create negative ecological and human health impacts in the surrounding area.
Americans are well aware that the very process of building an eco-friendly vehicle, which is meant to reduce people’s carbon footprints, causes environmental damage.
Lack of Battery Recycling
One solution that people propose to counter the effects of mining is reusing spent EV batteries. They can be recharged using solar power and put into a new vehicle, with the old car being recycled. The batteries can also be recycled to extract rare metals from them.
However, the U.S. lags when it comes to recycling batteries. China has numerous factories that grind them down and extract the leftover minerals, but in the United States, the time and labour involved in recycling a car battery don’t pay off.
A glimmer of hope exists in the form of Redwood Materials, a U.S.-based battery recycling company that can extract metals from batteries at a lower cost than mining. In the meantime, the U.S. relies heavily on outsourced materials mined in other countries.
Chip Shortages and High Metal Prices
The prices of cobalt, lithium and nickel have increased significantly, driving up the cost of EVs even further. There are also still semiconductor chip shortages brought on by early pandemic shutdowns since manufacturers haven’t recovered from those supply chain disruptions.
Semiconductor chips are part of a car’s air conditioning system, air bags, ABS and stabilization system, touch screens and more. The chip shortage has had a massive impact on vehicle production. In September 2021, Toyota cut its global output by a whopping 40% due to the chip scarcity. This is one reason why it’s so hard to find an EV right now.
Increased Consumer Demand
Additionally, since COVID restrictions have been lifted in many places, people are excited to travel again. This has increased the demand for EVs, especially when coupled with high gas prices and a growing shift toward sustainable living. Manufacturers are struggling to keep up.
The United States should provide higher subsidies for people to purchase electric vehicles. Part of the reason other countries, especially China, are doing so well with EV sales is that residents are incentivized to buy them.
However, U.S. car dealership inventories are running dry, so to make up for the low sales volume, they often tack on additional markups on top of the manufacturer’s suggested retail price. This can negate the impact of subsidies. In Australia, as in the U.S., the high demand for electric cars is overshadowed by their inaccessible price tag.
EV Supply Chain Takeaways
Burdened by chip shortages, global supply chain disruptions, low subsidies and more people wanting to buy electric cars, the American EV business is struggling to keep up with consumer demand. In some ways, it can be taken as a good sign that people are ready to embrace sustainable vehicles.
Time will tell if this multifactorial problem will resolve itself. For now, it’s a seller’s market.