It is not an exaggeration to term electric vehicles as the ones transforming the global automobile scene. Over the last five years alone, the market for EVs has transitioned from niche to mass. The International Energy Agency records that EV sales passed the 14 million mark in 2023, nearly double their level in 2021. That’s not a modest change; it is a revolution in the way the world perceives mobility.

But underneath each EV driving down the street is a tale of ruthless supply chain stress. Unlike traditional cars, where steel, plastics, and electronics hold sway in procurement, EV manufacturing is rooted in batteries. And batteries are voracious consumers of resources. They demand lithium, cobalt, nickel, and graphite, minerals that are unevenly dispersed across the globe. Consequently, procurement executives have the dual challenge of obtaining sufficient supply and doing so in a manner that is cost-efficient, ethical, and resilient. 

Here, in this blog, we are going to discuss the special procurement issues in EV battery supply chains, from raw material shortages to sustainability, and how businesses are coping with this changing world.

Grasping the EV Battery Supply Chain

In an effort to better grasp the procurement puzzle, it is beneficial to first consider how EV batteries are assembled.

An average battery pack consists of cells, modules, and packs. The most complicated part of it all is the cells. They are dependent on a combination of cathodes, anodes, separators, and electrolytes. All these need particular materials. The cathodes, for example, require lithium and nickel; anodes are constructed from graphite.

It begins in mining, proceeds to refining, proceeds further to chemical processing, and then goes to cell and pack assembly. Procurement is absolutely essential at every step. If there is a shortage of mining capacity, or refining is geographically aggregated, then procurement groups have to work their way out by finding alternatives or negotiating long-term agreements.

What sets this supply chain apart from the norm in the traditional automotive world is its fragility. However, steel or aluminum from multiple global suppliers can be easily obtained, while battery-grade lithium or cobalt is much more concentrated, often in politically unstable or geographically limited regions.

Challenges in EV Battery Supply Chains for Procurement

Procurement teams in this domain do not merely buy materials but are stepping into a minefield of risks. Some of the greatest challenges are:

1. Shortages and Price Fluctuations

Lithium has been referred to as the “white gold” of the EV era, and for a good reason. Prices have skyrocketed between 2020 and 2022 before tempering down, but the underlying problem persists: demand is increasing faster than supply. A new mine for lithium can take close to a decade to come online, with automakers bringing new EV models to market every year. This mismatch creates cost predictability nightmares for procurement leaders.

2. Converged Supply Chains

More than 70% of EV battery manufacturing is done in China. That level of concentration is effective from a manufacturing perspective but dangerous from an acquisition point of view. Any geopolitical strain, trade restriction, or domestic interruption can have far-reaching effects across the world, exposing manufacturers to vulnerabilities.

3. Long Lead Times

Unlike with conventional auto components, which generally can be procured in a hurry, EV battery materials are long-range. Approvals to mine, facilities to refine, and gigafactory expansion all have multi-year schedules. For procurement buyers, this entails planning decades in advance, in some cases making gambles on technologies and suppliers that won’t deliver for years. 

4. ESG and Ethical Issues

No EV maker would want to sell “green” vehicles manufactured using materials associated with child labor or ecologically harming the environment. But this is a genuine fear, particularly with regards to cobalt mining in the Democratic Republic of Congo. Procurement professionals are compelled to trace and certify sourcing, balancing commercial requirements and ethical considerations.

5. Logistics and Transportation

Batteries are heavy, bulky, and hazardous materials due to their flammability. Shipment across continents entails specialized care and strict mandatory requirements. This imposes another level of expense and complexity that procurement teams have to contend with.

Sustainability and Circular Procurement

There is another dimension to procurement in EV supply chains: sustainability. There are increasing demands from regulators, investors, and customers for cleaner solutions. For procurement teams, this is not a “nice to have”; rather, it is fast becoming a compliance requirement.

One such promising sector is circular procurement. Rather than using virgin mining, firms are going in for recycling. Recycling EV batteries at the end of their life are being stripped down, and major metals like lithium, cobalt, and nickel are recovered for reuse. Recovery rates as high as 95% for major materials have been estimated by some studies.

In tandem, “second-life” uses are being developed. Batteries that are no longer up to scratch for EVs can be used for stationary energy storage applications, like backing solar farms or balancing power grids. That minimizes waste and increases the choice procurement teams have in sourcing practices.

By integrating circularity into procurement, businesses are able to decouple themselves from raw material scarcity while still meeting sustainability objectives. The EU Battery Regulation is already moving in this direction, requiring recycled content in new batteries, which is where the global market is going.

Increasing Competition Among OEMs for Battery Supply

If procurement issues were not complicated enough, competition between automakers makes it more difficult. It’s a regular sprint with every major OEM in the race: Tesla, BYD, Volkswagen, General Motors, Hyundai, and several dozen others. The truth is that battery availability is limited, and the large players are moving quickly to acquire it.

Tesla, for example, has entered into multi-year deals directly with Australian lithium miners. Volkswagen has taken stakes in cell production joint ventures in Europe. Chinese giants such as BYD are integrating vertically, from mining through to finished cars.

This race for military equipment is detrimental to smaller automakers and startups. They lack the volume or budgetary strength to secure supply commitments. 

Procurement teams in these organizations must think out of the box!!

Moglix Business specializes in tech-enabled B2B procurement and supply chain solutions, offering MRO sourcing, custom manufacturing procurement, and infrastructure industry supplies to enterprises. Their digital transformation capabilities directly address EV battery supply chain procurement challenges through vendor consolidation, complete visibility dashboards, tech-enabled tracking, and integrated procurement platforms that enable predictability, cost efficiency, and agility at scale for complex manufacturing supply chains like those required in EV battery production.