Global electric car industry faces looming supply shortage of natural resources and increased environmental pressures

The global electric vehicle (EV) market is on the cusp of exponential growth as it aligns with government mandates to reduce CO2 emissions by replacing combustion engine vehicles with cleaner alternatives. Yet, as carmakers gear up to electrify their fleets, they face challenges to secure supplies of raw materials used for battery production and to prove the environmental benefits of a lifecycle perspective, according to a recent report produced by independent research organization A.T. Kearney Energy Transition Institute.

Given global environmental pressures and governments’ ambitions to remain sustainable, the electric car and battery markets are poised for massive growth. The Middle East region, and particularly the GCC is one of the world’s most receptive new energy vehicle markets, due to strong government support around the region and growing customer acceptance.

However, the report highlights the need to look at the holistic life-cycle management of EVs to ensure the desired reduction of CO2 footprint is indeed achieved. This will require nations to consider which energy sources are used to charge electric car batteries.

According to the report, cobalt is in particularly short supply globally and reserves could be depleted completely by the time 300 million EVs are produced—a modest proportion compared to the 1.2 billion cars on roads today. In addition, global lithium production has risen 7 percent a year since 2018, but to keep up with demand, miners need to accelerate production to more than 9 percent a year. Rising demand and tight supplies have also led to price increases.

“Electric car batteries rely on a host of rare materials—from lithium and nickel, to cobalt. Battery makers around the world are struggling to secure supplies of these key ingredients as demand outstrips supply. This undoubtedly places pressure on carmakers, so the hunt for alternative technologies is on,” said Romain Debarre, managing director, A.T. Kearney Energy Transition Institute.

“The region is transforming and supporting the move to electric vehicles. As renewable energy expands throughout the Middle East, electric vehicles are poised to be the next big trend as eco-friendly cars becomes more affordable.” concluded Kurt Oswald, board member, A.T. Kearney Energy Transition Institute and Partner, A.T. Kearney.