P R I S M : A C H I E V I N G R E S I L I E N C E A N D S U S TA I N A B I L I T Y F O R T H E E V B AT T E R Y S U P P LY C H A I NARTHUR D. LITTLE

ACHIEVING
RESILIENCE ANDS U S TA I N A B I L I T Y
F O R T H E E V B AT T E R Y
S U P P LY C H A I N
AUTHORS
Patrick Dutz, Felix Hoffmann, Bernd Schreiber, Philipp Seidel,
Alexander Krug, Rodrigo Navarro, Kai Oliver Zander, Shinichi Akayama

Batteries are a key enabler of the clean
energy transition in mobility, whichmakes their supply chains vital at a time
when the electric vehicle (EV) market is
growing dramatically and billion-dollar
investments have been announced in

new EV battery gigafactories aroundthe globe.

However, battery supply chains remain complex, global, and fragile,
with many still evolving from scratch. Their resilience is impacted
by a growing number of factors, from rising raw material costs togeopolitical disruption. Average battery pack prices have risen
in 2022, the first increase since 2013. Environmental, social, andgovernance (ESG) concerns, greater regulation, and governments’desire to localize battery production add to pressure on alreadystretched global supply chains. All of these factors lead to potential
bottlenecks that affect production.
Given the importance of batteries to decarbonizing transport andachieving Net Zero targets, resilience in EV battery supply chainsis a business, political, and societal imperative.
As this article explains, success requires new, more circularapproaches across the wider battery value chain, built on greatertransparency and an end-to-end view that will bring security ofsupply going forward.

23

P R I S M : A C H I E V I N G R E S I L I E N C E A N D S U S TA I N A B I L I T Y F O R T H E E V B AT T E R Y S U P P LY C H A I N

T H E C H A L L E N G E S T O B A T T E R Y S U P P LY
CHAIN RESILIENCE
Batteries are central to current and future generations of EVs. Yet,the precious metals required for today’s lithium ion (Li-on) batteries
are scarce, and in many cases, current supplies will not meet
predicted demand.
As can be seen in Figure 1, the battery supply chain is complex andtypically distributed across multiple industrial sectors, geographies,
and players.

SUPPLYCHAIN
KEY
ACTIVITIESRAW MATERIALMINING

MATERIAL
PROCESSING• REQUIRED RAW• DETAILS OF• FIVE MINERALS• REFINING

MATERIALS AND
QUANTITIESDEPEND ON
CELL CHEMISTRYARE CONSIDEREDCRITICAL FOR
LI-ION BATTERIES:NICKEL, COBALT,
GRAPHITE,MANGANESE AND
LITHIUM• MINING METHODS

MATERIAL REFINING
PROCESS VARY
BASED ON TYPE OF
MATERIAL

TYPICALLY INCLUDESPROCESS STEPSOF LEACHING,
SOLUTION
PURIFICATION AND
BATTERY METAL OR
BATTERY CHEMICALPRODUCTION

DEPEND ON
MATERIALS,
LOCATION, ETC.

MAIN
OUTCOMERAW
MATERIAL

CELL
PRODUCTION

BATTERYASSEMBLYBATTERY
INSTALLATION

LIFECYCLE
MANAGEMENT• CELL PRODUCTION• CONFIGURATION OF• BATTERY PACKS ARE• AFTER SEVERALCONSISTS OF THREE
MAIN PROCESSSTEPS: ELECTRODE
MANUFACTURING,
CELL ASSEMBLY AND
CELL FINISHING• ELECTRODEASSEMBLEDBATTERY CELLS INTO
LARGER MODULES
ALREADY COMBINEDWITH SOMEELECTRONICMANAGEMENTMANUFACTURING
AND CELL FINISHING
ARE INDEPENDENTOF CELL TYPE; CELLASSEMBLY PROCESSDEPENDS ON CELL
GEOMETRIES• BATTERY MODULESBATTERYCELL

BATTERYPACK

BATTERY METAL/CHEMICALARE INTEGRATED IN
BATTERY PACK WITHSYSTEMS THATMANAGE, E.G.,
POWER, CHARGING
AND TEMPERATURE

INSTALLED IN THEIRSPECIFICAPPLICATION(BATTERY ELECTRIC
AND PLUG-IN
HYBRID VEHICLES,
ETC.)• INSTALLEDBATTERIES ARE
THEN READYFOR THEIR 1ST
LIFECYCLE USAGE

INSTALLED
BATTERY PACK

It is also extremely volatile, impacted by a range of factors thatchallenge resilience, sustainability, and productivity:

1 . I N C R E A S I N G B U T U N P R E D I C TA B L E
B AT T E R Y G R O W T H
The vast majority (approximately 89 percent) of batteries will be
destined for EVs, with a further 8 percent for the energy storage
sector. Driven by a combination of rising consumer demand andgovernment action, the EV market is growing dramatically and rapidly.
As the world swaps fossil fuels for electric power, countries andplayers are scrambling to adjust.
To meet this need, global battery production is expected to increase
14-fold between 2018 and 2030, with a CAGR of 25 percent. An
impressive number of new, multi-billion-dollar gigafactories havebeen announced across the globe, funded by a combination of new
players, governments and traditional automotive companies. In
Europe alone, battery production capacity is expected to reach more

24

• BATTERIES ARE

EITHER
REPURPOSED (2ND
LIFECYCLE AS
STATIONARYENERGY STORAGE
SYSTEMS) OR
RECYCLED• RECYCLED

MATERIALS ARE FEDBACK INTO CELLPRODUCTION

FIGURE 1: THE END-TO-END BATTERY SUPPLY CHAIN

than 1,100 GWh by 2030 if all plans are fully realized.

YEARS OF USAGE,A BATTERY’S 1ST
LIFECYCLE ENDS

REUSED/RECYCLED
BATTERYARTHUR D. LITTLE

However, the complexity of supply chains and scarcity of raw
materials mean there are questions over whether consumer-driven
demand for EV batteries can be met on the production side. As
was demonstrated by the shortage of semiconductors disrupting
production post-pandemic, the automotive supply chain has limited
resilience around key components.
To further complicate supply chain planning, there is a wide range ofviews on how much demand will increase and whether it can be met.
Forecasts for global EV battery demand in 2030 vary from 1.5 to 4
terawatt hours (TWh) of annual new installed capacity 1.
Scale will be vital to success, but moving from today’s lower
production volumes to achieve planned targets is not straightforward.
As well as securing raw materials, scaling will require companies
to quickly build expertise and invest in the right production tools
if they are to operate efficiently and effectively. There are alreadyindications that a lack of available production equipment may
become a further bottleneck as multiple new gigafactories arebuilt simultaneously.

2 . R A W M AT E R I A L S C A R C I T Y
Batteries rely on a global supply chain, bringing together a range ofmaterials such as metals from Africa, lithium from Latin America/
Australia, nickel from Russia, and refined materials from China.
In many cases, first-

R AW MATERIAL PRIC ES HAVERIS EN DR AMATICALLY – THE
AVER AG E C O PPER PRIC E HAS
IN C RE AS ED S IG NIFICANTLY FRO M
APPROX IMATELY $ 6 .0 K /MT IN 20 19
TO APPROX IMATELY $ 9. 3K /MT IN 20 2 1 .

movers such as Chinese
battery manufacturers
have already secured
vital supplies, leaving
new players searchingfor sources. Raw material
prices have risen
dramatically – the average
copper price has increased

significantly from approximately $6.0k/mt in 2019 to approximately$9.3k/mt in 2021, while the average nickel price grew from roughly$13.9k/mt to about $18.5k/mt over the same time period. Prices have
spiked even further in 2022 due to geopolitical uncertainty andsanctions.
Predicted demand outstrips current supply, particularly in regions
such as the EU, which lack major local sources. For example, graphite,lithium, and cobalt are already on the European Commission’slist of critical raw materials, flagged as potentially having highimportance and supply risks. There is a danger that current fossil
fuel dependencies in areas such as the EU could simply be replacedby new dependencies on imported minerals required for EV battery
manufacture.

1. https://www.iea.org/data-and-statistics/charts/annual-ev-batterydemand-projections-by-region-and-scenario-2020-2030

25

P R I S M : A C H I E V I N G R E S I L I E N C E A N D S U S TA I N A B I L I T Y F O R T H E E V B AT T E R Y S U P P LY C H A I N

3 . V O L AT I L E M A R K E T D Y N A M I C S
Not only do battery manufacturers have to secure the right materials,
but they must also ensure these are delivered on time and in
sufficient volumes. Supply chain disruptions caused by the pandemic,
the closure of the Suez Canal, and sanctions on Russia all highlighta lack of resilience that impacts production. Increasing tensions
between China and the West are also leading European and US players
to reduce their exposure to and reliance on the country. Growing
protectionism around the

THE S HIF T TO E VS C HAN G ES
THE DYNAMIC S O F THE
AUTO M OTIVE MARK E T, WITH
BAT TERIES MAK IN G UP A MUC H
HIG HER PERC ENTAG E O F A
VEHIC LE’ S VALUE (4 0 PERC ENT
IN 20 20, PRED IC TED TO DRO P
TO APPROX IMATELY
2 7 PERC ENT IN 2030) .

world is likely to increaserisks as governments
potentially channel local
resources to their own
national champions.
The shift to EVs changes the
dynamics of the automotive
market, with batteries
making up a much higher
percentage of a vehicle’s
value (40 percent in 2020,

predicted to drop to approximately 27 percent in 2030). This impacts
the relationships between players, and how much value (and margin)
they can derive from EVs.
On the technology side, future battery composition is not fixed. A raftof new chemistries are being introduced to meet demands for greater
power and capacity and reduce cost by lowering reliance on scarcer
materials, and at the same time increase sustainability. Players,whether manufacturers, OEMs, or recyclers, all need to be able tobuild plans that cope with this uncertainty.

4 . G R O W I N G R E G U L AT O R Y O B L I G AT I O N S
Players in the value chain need to meet a growing number of existing
local and international regulations for safely and responsibly
extracting raw materials, and then producing, transporting, anddisposing of batteries when they reach end of life.
Regulations are increasing as the market for li-ion batteries grows.
For example, the proposed EU Regulatory Battery Framework will
increase the percentages of recycled content required within newbatteries and set stricter targets for recycling efficiencies. The aim is
not only to drive a more circular battery economy, but also to reducereliance on importing or mining scarce raw materials, which willfurther drive down the carbon footprint of EVs. Battery recycling also
brings new, growing opportunities for players.

26

ARTHUR D. LITTLE

5. THE REQUIREMENT FORS U S TA I N A B I L I T Y
Many argue that while EVs themselves do not rely on fossil fuels, thesupply chain that creates their batteries has major environmental andsocial impacts due to mining, refining and transport. Regulations suchas the EU Battery Framework and the increased focus on measuring
and reporting on ESG impacts are making the supply chain moretransparent, as is the push to create a circular battery economy.
Achieving sustainability is a key requirement across the supply chain,as companies need to meet ESG criteria and invest in areas suchas recycling to increase resilience. Certification must be in place
to show that any new raw materials have been mined responsibly.
Demonstrating sustainability is also vital to increase businessresilience, as it impacts the ability to attract talent and investment
and make sales.

EU LEGISLATION AND POLICIES RELATED TO BATTERY RECYCLING
EU LEGISLATIONAND
POLICIES
RELATEDTO BATTERYARE
EXPECTED TO
IMPACT
AND
STRENGTHENTHE RECYCLINGENTIRE CHAIN
ARE EXPECTED TO IMPACT AND STRENGHEN THE ENTIRE CHAIN
EU REGULATION SUMMARY IMPACT ON BATTERY VALUE CHAIN

RAW MATERIALSACTIVE MATERIALSBATTERY MANUFACTURING
AND OEMs

RECYCLING

EXTENDED PRODUCERRESPONSIBILITY

REDUCE NEED FOR VIRGIN
RAW MATERIALSVERTICAL INTEGRATIONVERTICAL INTEGRATION

INCREASED LOCALIZED SUPPLIERS

INCREASE TRACEABILITY

SELF-SUFFICIENCYLEVERAGE EU
INDUSTRIALCAPABILITIESBUILD LOCALIZEDCAPACITYBUILD THE EUECOSYSTEMFIGURE 2: IMPACT OF EU LEGISLATION AND POLICIES ON BATTERY VALUE CHAIN

27

P R I S M : A C H I E V I N G R E S I L I E N C E A N D S U S TA I N A B I L I T Y F O R T H E E V B AT T E R Y S U P P LY C H A I N

A TOOLKIT FOR BUILDING A RESILIENT
B AT T E R Y VA L U E C H A I N
The lithium-ion battery value chain differs from other industrial
value chains due to its specific challenges. Successfully building
resilience into the value chain requires players to take an end-toend perspective, from raw material sourcing to recycling – wherever
they are within the supply chain. They need to understand the key
upstream and downstream challenges and how they will impact theirbusiness to make plans that increase control. Unlike in many othersectors, the supply chain extends to critical materials, unstableglobal regions, and various industries, and faces unprecedented
surges in demand. This requires a transparent, holistic understandingof supply chain risks, strong forecasting capabilities, and a nimble andinnovative approach both upstream and downstream:

E N S U R I N G T R A N S PA R E N CY A N D
U N D E R S TA N D I N G
In such a complex and dynamic supply chain, taking a silo-based
approach is simply not enough. For example, if you are a battery cellmanufacturer, you need to understand and safeguard both material
supply and the end-of-life needs of OEM customers, and research
the requirements, constraints, opportunities, and technologies along
the whole chain. You then need to use this to identify current andpotential risks. More and more battery producers are engaging in
upstream and downstream activities – for example, both BYD and
Tesla are looking at acquiring lithium sources. Risks can change
quickly in a volatile ecosystem, so this needs to be a constant
exercise.

DEVELOPING THE RIGHT FORECASTINGC A PA B I L I T I E S
While it is growing rapidly, the battery market is still immature.
There are a range of competing predictions around future demand.
Everything from potential battery technology changes to regulation
can impact demand for particular raw materials and finishedproducts. Developing strong forecasting across a range of scenarios istherefore vital to deciding where opportunities are strongest and how
the right level of supplies can be safeguarded, such as through theright investments. Forecasting should focus not just on raw materials,
but also other inputs. For example, the large number of planned
gigafactories is leading to high demand for both skilled staff and theequipment used within them. Battery producers are already facing
shortages in both areas. This needs to be planned for, along withwider automotive supply chain issues, such as the global shortageof semiconductors.

28

ARTHUR D. LITTLE

Once battery players have built this end-to-end perspective, they
can understand better how they can control factors to mitigate
risks. Typical actions to achieve control cover a spectrum of models,from full vertical integration (as practiced by Tesla) to a looser,
partnership-based approach (as done by many other OEMs). Electricvehicle manufacturer BMW, for example, set up a fully fledged
battery-cell competence center not to bring production in-house, but
to better understand technology and production processes.

S T R O N G V E R T I C A L I N T E G R AT I O N
One strategic answer to building resilience is vertical integration, astrategy adopted early by Tesla, when it was contrary to then-current
industry practice. Pulling key parts of the battery and components
value chain in-house gives a high degree of control and mitigates risk.
In the case of Tesla, vertical integration includes:– In-house battery production (and development)– Significant internal software and semiconductor skills, including
designing own chips. This allows greater flexibility and agility –for example, it makes it more straightforward to switch between
different types of chip, mitigating availability risks– Acquisition of suppliers – from those that provide production
tooling down to raw material suppliers, and even mining licenses.
For example, Tesla has purchased Grohmann Engineering (aspecialist in manufacturing automation), ATS Automation Tooling
Systems, and Hibar Systems

REGIONALIZATION / VERTICAL INTEGRATIONREGIONALIZATION/VERTICALINTEGRATION

SUPPLYCHAIN

EXEMPLARYCOMPANIES

RAW MATERIALMINING

MATERIAL
REFINING

GLENCORE/BHP/POSCO/
PIEDMONT/GANFENG LITHIUM/HUAYOU COBALT/MILLENIAL
LITHIUM

GM ANNOUNCES LONG-TERM
SOURCING AGREEMENT WITH
GENCORE ON THE SUPPLY OF
COBALT FROM ITS SITE IN
AUSTRALIA

CELL
PRODUCTION

BATTERYASSEMBLY

CATL/LG ENERGY SOLUTION/PANASONIC/BYD/SAMSUNG
SDI/NORTHVOLTVOLKSWAGEN INVESTS IN
SWEDISH BATTERYPRODUCER NORTHVOLT TO
SECURE BATTERY CELLSFOR ITS EVS AND PLANS 6
BATTERY MANUFACTURINGSITES IN EUROPE FORITSELF

BATTERY
INSTALLATIONTESLA/TOYOTA/VW/
DAIMLER/GMTESLA PLANS TO STARTPRODUCING BATTERYCELLS FOR EVS IN THEIR
GIGAFACTORIES, WHERE
THEY ALREADY ASSEMBLE
EV BATTERIESLIFECYCLE
MANAGEMENTTESLA/TOYOTA/
VW/DAIMLER/GM

VOLKAWAGEN ANDTESLA ARE RECYCLINGEVS TO REINTRODUCEVALUABLE MATERIALS INTO
THE MANUFACTURING
PROCESSEV MANUFACTURERS ARE ENTERING LONG-TERM AGREEMENTS AND STRATEGIC PARTNERSHIPS TO SECURE CRUCIAL SUPPLIES,
WHILE INCREASING THE DEGREE OF VERTICAL INTEGRATION BY ENGAGING IN BATTERY CELL PRODUCTION AS WELL AS RECYCLING.

FIGURE 3: PARTNERSHIPS AND VERTICAL INTEGRATION ACROSS THE BATTERY SUPPLY CHAIN

29

P R I S M : A C H I E V I N G R E S I L I E N C E A N D S U S TA I N A B I L I T Y F O R T H E E V B AT T E R Y S U P P LY C H A I N

However, full vertical integration is not possible for all players, anddoes have downsides. In a growing market, acquiring key suppliers orpartners requires deep pockets, particularly as there is a shortage ofavailable targets that have not already partnered or taken investment
from other, competing players. Given the fast-changing nature of the
EV ecosystem, there is also a significant risk that acquisitions will notdeliver long-term value or will tie a player to a technology, process, ormaterial that will be potentially superseded.

S T R AT E G I C P A R T N E R S H I P S A N D
ECOSYSTEMS
To avoid risks from straight vertical integration, many EV OEM andbattery players enter strategic partnerships. Those provide new
approaches to value creation, going beyond traditional buyer/seller
relationships. They deliver resilience by minimizing key battery supply
chain risks, but also provide access to IP, experience, and innovation.
They include:– Joint ventures and investments. For example, Volkswagen has
invested in battery technology company QuantumScape andbattery producer Northvolt to secure upstream and downstream
battery knowledge– Partnerships to guarantee supply of materials or capabilities. BMW
has an agreement with Ganfeng to source sustainable lithium forbatteries from Australia– E xperience exchange and cooperation in industry alliances
between manufacturers and other players along the battery value
chain, such as Eurobat and NAATBatt, to access knowledge andcapabilities from complementary players– Joint selling/production – working together to develop battery
technologies at lower cost and higher performance. Example
partnerships include Mercedes-Benz and ACC, General Motors andPosco, and Stellantis and LG. There are also joint ventures between
upstream battery players such as BASF and Shanshan– C ooperation – resource sharing without investment or creation of aseparate legal entity. Examples of this include long-term strategic
contracts (such as between Umicore and ACC) and the intent toestablish a battery recycling cluster in Finland driven by BASF,
Fortum and Nornickel

N E X T- L E V E L I N T E G R AT E D B U S I N E S S
PLANNING
Truly integrated business and supply chain planning is a key
prerequisite of building resilience across the battery supply chain.
Volatility and uncertainty require continuous synchronization ofstrategic, tactical and operational plans between all partners
in the extended supply chain and the company’s internalorganizational units.

30

ARTHUR D. LITTLE

Adopting an integrated business and supply chain planning process
allows battery companies along the value chain to fundamentally
reduce the time it takes all players to react to changes in demand,
adapting their supply and manufacturing capacities and priorities
more quickly. Companies should look to increase capacity acrossthe supply chain (such as for raw materials, refining and recycling).
Unaligned decisions and priorities within functional silos and the
supply ecosystem are avoided. For example:• The CFO of a battery supply manufacturer clearly understands
when to invest in new manufacturing capacity to avoid futuredelivery constraints, including a clear understanding of rampup processes and potential technology-induced capacity
constraints.
• The production and materials manager is able to ensure thatthey have all labor and material requirements in place to meetdemand, including machinery for specific processes.
• The maintenance team knows exactly what activities it needs to
do and the optimal time to overhaul equipment.
It is key to align planning across all aspects of the organization(R&D, commercial, demand, production/supply and financial) and use
this to create a joint strategic and operational plan. In the case ofbattery production, this must be extended beyond the borders of theindividual organization. This provides a clear, real-time, end-to-end,aligned view that acts as a single

IT IS K E Y TO ALIG N PL ANNIN G
AC RO S S ALL AS PEC T S O F
THE O RGANIZ ATI O N (R& D,
C O MMERC IAL , DEMAND,PRO DUC TI O N/SUPPLY AND
FINAN C IAL ) AND US E THIS TOC RE ATE A JO INT S TR ATEG IC
AND O PER ATIO NAL PL AN .

source of truth for fast, agile, factbased decision-making. Applying
AI and automation on top of thisprocess can then augment humancapabilities, helping to mitigate
risk in a complex, dynamic supply
chain.
Against a background of fastpaced production ramp-ups andthe resulting fight for all kinds ofrequired resources, better planningwill be even more decisive. It also enables battery companies todynamically remodel their supply chains, such as by substituting
suppliers or adding new, local sources of critical raw materials suchas recycled batteries.

31

P R I S M : A C H I E V I N G R E S I L I E N C E A N D S U S TA I N A B I L I T Y F O R T H E E V B AT T E R Y S U P P LY C H A I N

INSIGHTS FOR THE EXECUTIVE
The battery value chain is both extensive and complex, ranging
from raw material producers all the way to recyclers, and impacting
the thinking and planning of a wide range of companies. To ensure
resilience, executives therefore need to:– Build a strong understanding of current and future battery value
chain characteristics, focused on the key risks– Use this to evaluate potential concerns and identify opportunities
for vertical integration– Enable holistic, end-to-end SCM by creating and implementing
specific tools and processes to improve transparency and steering
across organizational borders– E xtend partnerships across the battery ecosystem to fill gaps, build
capacity, and mitigate risk – and think beyond traditional structuresof suppliers, OEMs, competitors, etc.
– Focus on securing a sustainable supply of the battery materials
they need. This should be sustainable in two ways – meeting ESG
criteria and being reliable, long-term, and able to scale with thebusiness needs, such as by embracing circular supply chains– Increase technical and process flexibility by optimizing R&D,
procurement, and manufacturing. For example, build in agility
to cope with emerging battery chemistries and the introductionof new materials, while creating redundant sourcing of key
components– Where possible, simplify and rebuild supply chains, substituting
distant with local suppliers (such as close-by battery recyclers) tomitigate volatility and introduce diversification of sources
Achieving resilience will require continuous innovation across thefull range of supply chain tactics, not only diversifying suppliers andvertical integration, but also adopting a holistic approach that takes
the entire value chain into account.

32

ARTHUR D. LITTLEPATRICK DUTZ
is a Manager in Arthur D. Little’s Munich office and amember of the Operations Strategy & Transformation
Practice.
FELIX HOFFMANN
is a Consultant in Arthur D. Little’s Munich office and amember of the Automotive & Manufacturing Practice.
BERND SCHREIBER
is a Managing Partner in Arthur D. Little’s Frankfurt
office and Global Head of Operations Management.
PHILIPP SEIDEL
is a Principal in Arthur D. Little’s Munich office and amember of the Automotive & Manufacturing Practice.
ALEXANDER KRUG
is a Partner in Arthur D. Little’s Frankfurt office and amember of the Automotive & Manufacturing Practice.
RODRIGO NAVARRO
is a Principal in Arthur D. Little’s Amsterdam office anda member of the Technology & Innovation Management
Practice.
KAI OLIVER ZANDER
is a Principal in Arthur D. Little’s Frankfurt office and amember of the Strategy & Transformation Practice.
SHINICHI AKAYAMA
is a Partner in Arthur D. Little’s Tokyo office and amember of the Technology & Innovation Management
Practice.

33