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Biden Administration Report Highlights Supply Chain Vulnerabilities For EV Batteries and Critical Metals

The Biden Administration has released reports assessing the vulnerabilities of four critical supply chains: semiconductor manufacturing and advanced packaging;…

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This article was originally published by Green Car Congress.

The Biden Administration has released reports assessing the vulnerabilities of four critical supply chains: semiconductor manufacturing and advanced packaging; large capacity batteries, such as those for electric vehicles; critical minerals and materials; and pharmaceuticals and advanced pharmaceutical ingredients (APIs).

Four federal agencies took the lead in authoring each of the reports: the Department of Commerce on semiconductor manufacturing and advanced packaging; the Department of Energy on large capacity batteries; the Department of Defense on critical materials and minerals; and the Department of Health and Human Services, particularly the Food and Drug Administration, on pharmaceuticals and APIs.

Across the four sectors, there are a set of inter-related themes and findings that contribute to supply chain vulnerabilities. These are:

 

  • Insufficient US manufacturing capacity. The loss of manufacturing capabilities has led to a loss in innovation capacity. Manufacturing capabilities underpin innovation in a range of products and once lost, are challenging to build back. In recent decades, when production capacity headed overseas, the R&D and broader industrial supply chains often followed.

  • Misaligned incentives and short-termism in private markets. Current US market structures fail to reward firms for investing in quality, sustainability or long-term productivity.

  • Industrial policies adopted by allied, partner, and competitor nations. As US investment in the domestic industrial base has declined, its allies, partners and competitors have adopted strategic programs to advance their own domestic competitiveness. The Department of Energy’s analysis of the advanced battery supply chain documents the European Union’s (EU) support for demand policies, investment incentives, and regulatory tools—at both the EU and member-state level—to stimulate domestic production of electric vehicles and lithium-ion batteries. After a 2019 EU report designating the battery of “strategic interest,” the EU announced a $3.5 billion R&D fund to increase the industry’s competitiveness.

    Across all four reports, China stands out for its aggressive use of measures to stimulate domestic production and capture global market share in critical supply chains. Several strategies, including public investments in R&D, domestic demand incentives, and strategic international partnerships have been used to support both resilience and competitiveness of key economic sectors.

     

  • Geographic concentration in global sourcing. To ensure resilient supply chains, it is essential that they be globalized, the reports said. However, the search for low-cost production, combined with the effective industrial policy of key nations, has led to geographic concentrations of key supply chains in a few nations, increasing vulnerabilities for United States and global producers. Such concentration leaves companies vulnerable to disruption, whether caused by a natural disaster, a geopolitical event or a global pandemic.

    It is clear in the Department of Commerce’s report that the United States is dangerously dependent on specific countries for parts of the value chain of all of these products. The global economy depends on Taiwanese firms for 92% of leading-edge semiconductor production. China has more than 75% of global cell fabrication capacity for advanced batteries, as noted in the Department of Energy’s report. While the Department of Health and Human Services’ data suggests India and China compete for market share of many US medicines, industry analysis suggests India imports nearly 70% of its APIs from China.

  • Limited international coordination. Aside from a handful of pilot projects and other comparatively small diplomatic and multilateral initiatives to secure supply chains, the United States has not systematically focused on building international cooperative mechanisms to support supply chain resilience.

Batteries. Global demand for EV batteries is projected to grow from approximately 747 gigawatt hours (GWh) in 2020 to 2,492 gigawatt hours by 2025. Absent policy intervention, US production capacity is expected to increase to only 224 GWh during that period, but US annual demand for passenger EVs will exceed that capacity, according to the report.

Maintaining America’s innovative and manufacturing edge in the automotive sector and other key industrial sectors will require the United States to undertake a concerted effort to shore-up sustainable critical material supply and processing capacity, expand domestic battery production, and support EV and storage adoption.

The Administration said that:

  • The Department of Energy (DOE) will release a National Blueprint for Lithium Batteries. (Earlier post.)

  • DOE’s Loan Programs Office (LPO) will immediately leverage the approximately $17 billion in loan authority in the Advanced Technology Vehicles Manufacturing Loan Program (ATVM) to support the domestic battery supply chain. LPO will leverage full statutory authority to finance key strategic areas of development and fill deficits in the domestic supply chain capacity. This will include the ATVM program making loans to manufacturers of advanced technology vehicle battery cells and packs for re-equipping, expanding or establishing such manufacturing facilities in the United States.

  • DOE’s Federal Energy Management Program (FEMP) will launch a new effort to support deployment of energy storage projects by federal agencies.

Critical minerals and materials. The United States and other nations are dependent on a range of critical minerals and materials. Rare earths metals are essential to manufacturing everything from engines to airplanes to defense equipment. Demand for many of these metals is projected to surge over the next two decades, particularly as the world moves to eliminate net carbon emissions by 2050.

For example, global demand for lithium and graphite, two of the most important materials for electric vehicle batteries, is estimated to grow by more than 4,000% by 2040 in a scenario in which the world achieves its climate goals, with graphite projected to grow nearly 2,500%.

 

China was estimated to control 55% of global rare earths mining capacity in 2020 and 85% of rare earths refining. The United States must secure reliable and sustainable supplies of critical minerals and metals to ensure resilience across US manufacturing and defense needs, and do so in a manner consistent with America’s labor, environmental, equity and other values, the report said.

The Administration said that:

  • The Department of Interior (DOI), with the support of the White House Office of Science and Technology Policy, will establish a working group composed of agencies such as the Department of Agriculture (USDA) and the Environmental Protection Agency (EPA) to identify sites where critical minerals could be produced and processed in the United States while adhering to the highest environmental, labor, and sustainability standards.

    The Administration said its working group will collaborate with the private sector, states, Tribal Nations, and stakeholders—including representatives of labor, impacted communities, and environmental justice leaders—to expand sustainable, responsible critical minerals production and processing in the United States.

  • The Administration will establish an interagency team composed of staff from agencies including DOI, USDA, EPA, and others with expertise in mine-permitting and environmental law. This team will identify gaps in statutes and regulations that may need to be updated by Congress to ensure: new production meets strong standards before mining begins, during the mining process, and after mining ends; meaningful community engagement and consultation with Tribal Nations, respecting the government-to-government relationship at all stages of the mining process; and opportunities to reduce time, cost, and risk of permitting without compromising strong environmental and consultation benchmarks are fully explored.

  • DOD will deploy DPA Title III incentives—including grants, loans, loan guarantees, and offtake agreements—to support sustainably-produced strategic and critical materials, including scaling proven research and development (R&D) concepts and emerging technologies from other programs such as the Small Business Innovation Research awardees.

  • The DOE LPO, through its Title 17 Renewable Energy and Efficiency Energy Projects solicitation, has more than $3 billion in loan guarantees available to support efficient end-use energy technologies, such as mining, extraction, processing, recovery, or recycling technologies, of critical materials projects that satisfy Title 17 requirements.

  • The US Development Finance Corporation will expand international investments in projects that will increase production capacity for critical products, including critical minerals and other products, ensuring that investments that support supply chain resilience and uphold international standards of environmental and social performance.

In the short-term, the Administration will establish new Supply Chain Disruptions Task Force to provide a whole-of-government response to address near-term supply chain challenges to the economic recovery.

 

Energy & Critical Metals

Daimler Truck’s powertrain plants in Germany will produce electric drive components

Following intensive talks, Daimler Truck AG and the Works Council have agreed that the three powertrain sites in Gaggenau, Kassel and Mannheim will specialize…

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Following intensive talks, Daimler Truck AG and the Works Council have agreed that the three powertrain sites in Gaggenau, Kassel and Mannheim will specialize in different components for electrified drives.

In the future, they will drive the global production of battery-electric and hydrogen-based drive systems in a production and technology network for electric drive components and battery systems, together with the sister plant in Detroit. Significant additional investments in future technologies at the Daimler Truck powertrain plants will drive technological change.


  • The Mercedes-Benz plant in Gaggenau, which specializes in heavy-duty commercial vehicle transmissions, will develop into a competence center for electric drive components as well as the assembly of hydrogen-based fuel cell drive components.

  • The Mercedes-Benz plant in Kassel is expanding its current focus on commercial vehicle axles and will become a competence centre for electric drive systems.

  • The Mercedes-Benz plant in Mannheim, specialized in commercial verhicle engines, is drawing on the more than 25 years of experience of the Competence Center for Emission-free Mobility (KEM) located at the plant and is focusing on battery technologies and high-voltage-systems.

Important scopes for alternative drives, such as the production of electrically driven axle systems, e-motors and inverters, as well as the assembly of fuel cell systems, will be integrated into the powertrain plants in the future, in addition to investments in the reprocessing and recycling of battery systems.

Our industry is undergoing a transformation toward CO2-neutral trucks. Since conventional drive systems will also be with us for some years to come, we are focusing the future orientation of our powertrain plants primarily on flexibility, cost-effectiveness and very well-trained employees. This had to be reconciled in our negotiations with the Works Council. With the production and technology network for electric drive components and battery systems in conjunction with the competence centers at the plants, we have succeeded in doing so. In this way, we are creating optimum conditions for maximum competitiveness for our plants and at the same time laying the foundations for a successful future.

—Yaris Pürsün, Head of Global Powertrain Operations Daimler Truck

Another element of the technology network for electric drive components and battery systems are the innovation laboratories (InnoLabs). In addition to the competence centers, these are being set up at all plants. They specialize in innovative production processes, new technologies and products.

The aim of the InnoLabs is to close the gap between prototype production and series development. Series start-ups are thus to be prepared with maximum efficiency so that products can be transferred from the prototype phase to series production as quickly as possible. With the InnoLab Battery located at the Mercedes-Benz plant in Mannheim, Daimler Truck AG will establish its own pilot battery cell production and thus lay an important foundation stone for future competence in battery technology.

In its transformation toward CO2-neutral transportation, Daimler Truck is focusing on two all-electric drive technologies: battery and hydrogen-based fuel cell. With these, every customer application can be covered with full flexibility in terms of routes—from well-plannable, urban distribution transport to multi-day transports that are difficult to plan. Which solution is used by the customer depends on the specific application.

As the first battery-electric truck, the Mercedes-Benz eActros for routes in distribution transport will go into series production at the Mercedes-Benz plant in Wörth in October 2021, followed by the eEconic next year. The battery-electric eActros LongHaul for long-distance transport will follow from the middle of the decade. Key components be manufactured at the powertrain plants in the future.

In addition to the products, the powertrain plants are to become CO2-neutral from 2022, just like all other European Daimler Truck plants. This will be made possible, among other things, by a green power concept at Daimler: CO2-free power procurement from renewable energy sources will form the basis for CO2-neutral production. As part of this, the sites will purchase electricity from wind and solar farms as well as hydropower plants from 2022 onwards. On the way to becoming green production sites, the Mercedes-Benz powertrain plants are also to operate CO2-free in the long term by successively establishing fully renewable energy systems over the next few years.

The sister plant in Detroit, which is part of the global production network for powertrain components, will continue to strengthen its role in the US market and, as a competence center for electric powertrain components, make an important contribution to shaping sustainable transportation in the American market.

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Energy & Critical Metals

Tata Steel contracts for 27 electric trucks for transportation of finished steel in India

As part of its sustainability initiative, Tata Steel is partnering with an Indian start-up to deploy electric trucks for its steel transportin India. This…

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As part of its sustainability initiative, Tata Steel is partnering with an Indian start-up to deploy electric trucks for its steel transportin India. This marks the first use of EVs by any steel producer in the country for transportation of finished steel.


The electric trucks feature a 230.4 kWh Lithium-ion battery pack with a cooling system and a battery management system giving it capability to operate at ambient temperatures upto 60 °C (140 °F). The battery pack will be powered by a 160-kWh charger setup which would be able to charge the battery from 0 to 100% in 90 min. With zero tail-pipe emission, each electric vehicle would reduce the GHG footprint by more than 125 tCO2e every year.

Tata Steel has contracted for 27 EVs, each with a carrying capacity 35 tonnes of steel (minimum capacity). The company plans to deploy 15 EVs at its Jamshedpur plant and 12 EVs at its Sahibabad plant. The first set of EVs for Tata Steel are being put in operation between Tata Steel BSL’s Sahibabad Plant and Pilkhuwa Stockyard in Uttar Pradesh.

At a virtual ceremony organized on July 29, Tata Steel formally flagged-off the loaded vehicle at the Pilkhuwa Stockyard to move to the Sahibabad plant, 38 km away.

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Energy & Critical Metals

Tesla Is Hiking Prices In The U.S. While Slashing Them In China

Tesla Is Hiking Prices In The U.S. While Slashing Them In China

After posting its most recent earnings "beat", Tesla is taking on two starkly…

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Tesla Is Hiking Prices In The U.S. While Slashing Them In China

After posting its most recent earnings "beat", Tesla is taking on two starkly different strategies for its U.S. and its China business. 

In the United States, the automaker is raising prices in an attempt to boost profit margins, while in China it is keeping prices steady in what is likely an attempt to drum up more demand, Reuters reported

So far, Tesla has raised the price of its Model 3 and Model Y "about a dozen times" in the U.S. this year, the report notes. At the same time, the company also introduced an affordable version of its Model Y in China.

Tesla isn't just facing increased scrutiny in China from its citizens and the government, but is also running face-first into a wall of Chinese EV competitors. 

Toni Sacconaghi of Bernstein has questioned demand in China as a result of the introduction of the lower priced Model Y. He has said that the model "may make sustained margin improvement difficult". Chinese owners were "were less enthusiastic and had lower repurchase intentions than owners in the United States and Europe," a Bernstein survey recently showed.

Meanwhile in the U.S., Tesla continues to raise the price of its Model Y long range, which is now priced at $53,990. In China, the more affordable Model Y is priced at $42,394.

Roth Capital Partners analyst Craig Irwin told Reuters: "I think Tesla is looking to be as competitive as it can be in China. Lower prices will be a part of that aggressive market positioning. There is a very large difference in battery prices in the U.S. and China, as well as local vehicle manufacturing costs."

Hargreaves Lansdown analyst Nicholas Hyett added: "It wasn't so long ago that the group was trimming prices in the U.S. to gain scale and maximize profitability, and it feels like we're now seeing that in China too."

Gene Munster at Loup Ventures attests that the lower prices in China could "have a lasting effect" for the company in the country: "Teslas are on average 3x the cost of a typical EV made in China so they have to be priced less than the U.S. to compete. Prices of Teslas in China will be below (the) rest of the world for the next decade."

Tesla's market share in China has fallen to 11% in the battery electric vehicle market. China makes up 44% of the global EV market. 

 

 

 

Tyler Durden Fri, 07/30/2021 - 10:36
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