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Automakers, including industry giants like Tesla Inc. (NASDAQ:TSLA) and Mercedes-Benz (XETRA:MBGn), are rapidly securing graphite supply from sources outside of China to meet the soaring demand for electric vehicle (EV) batteries. Graphite, a vital component in EV batteries, has historically been overshadowed by other battery materials like lithium and cobalt. However, as EV sales surge, automakers are now realizing the need to address potential graphite shortages. This shift in focus comes as legislation in the United States and Europe aims to reduce reliance on China for critical minerals, heightening the urgency to diversify graphite supply chains.
As EVs are predicted to account for over 50% of the natural graphite market this year, automakers are racing to secure supplies from new producers in countries such as Madagascar and Mozambique. The demand for graphite is expected to continue rising rapidly, with forecasts indicating a global supply deficit of 777,000 tonnes by 2030. Meeting this demand will require approximately $12 billion in investments and the establishment of 97 new mines by 2035, according to industry experts.
Automakers, such as Tesla Inc. (NASDAQ:TSLA), Toyota Motor Corp (TSE:7203), and Ford Motor Co (NYSE:F), are actively seeking partnerships with new graphite suppliers. The need to secure a sustainable supply chain for graphite is a top priority for automakers.
Securing graphite supply deals is a complex process, involving extensive safety testing for each model of EV. However, automakers are motivated by the fact that natural graphite anodes have a significantly lower carbon footprint compared to anodes made from synthetic graphite derived from petroleum products. Natural graphite anodes offer advantages in terms of cost, cell capacity, and power output, allowing EVs to cover longer distances before needing to recharge.
China currently produces the majority of global natural graphite and controls 98% of the final processed material used for battery anodes. Despite efforts to diversify supply, China's dominance is expected to persist for the foreseeable future. However, Western processing operations are slowly growing, with the United States and the European Union working towards reducing dependency on any one country for critical raw materials.
Automakers are recognizing the importance of securing graphite supply chains beyond China to ensure a steady and sustainable flow of materials for EV batteries. The urgency to diversify sources arises from both increasing EV sales and legislative efforts to reduce reliance on China. By establishing partnerships with new graphite producers and addressing potential shortages, automakers aim to fortify their supply chains and meet the growing demand for EVs, while also considering the environmental benefits and carbon footprint of using natural graphite anodes.