Battery crunch is the new chip shortage.

Battery crunch is the new chip shortage.

The Battery Crunch: A New Challenge for the Auto Industry

The auto industry has been grappling with the chip shortage for a while now, but it seems like a bigger challenge is emerging: the battery crunch. As experts point out, while the chip shortage continues to impact vehicle supply, automakers are now facing the ramifications of a strained battery supply chain, which poses an even greater obstacle to their operations.

Legacy automakers such as Ford, GM, and Porsche are experiencing delays, constraints, and increased expenses related to electric vehicles (EVs) and their batteries. These issues not only hinder their ability to meet ambitious electrification targets but also take a toll on their balance sheets.

During Ford’s recent earnings call, CEO Jim Farley revealed that pricing pressure for EVs has significantly increased in the past 60 days. A major contributing factor to this price war is Tesla, led by the charismatic Elon Musk. Ford faces difficulties in lowering the prices of its EVs due to its lack of production scale, particularly concerning batteries. Tesla’s established presence in battery production allows them to achieve cost efficiency, something Ford is still striving to attain.

In fact, Ford expects to incur a staggering $4.5 billion loss in relation to EVs this year. This significant financial setback highlights the growing urgency for automakers to overcome the battery supply chain challenges.

General Motors (GM) CEO Mary Barra echoed similar concerns, indicating that one of its equipment suppliers is facing delivery issues, constraining GM’s battery module assembly. Barra further mentioned unexpected ramp delays, which indicate imminent bottlenecks in the battery side of their business. Battery shortages were even blamed for GM halting production at a Canadian manufacturing plant earlier this month.

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Executives at Porsche underscored the need for an improved battery situation to meet their targets this year. CEO Oliver Blume acknowledged that supply chain issues related to batteries have become a weekly occurrence, emphasizing the severity of the problem at hand.

The issues surrounding battery supply have been looming for some time. However, as auto companies intensify their pursuit of EV market share and invest billions to electrify their fleets, these challenges have materialized rapidly. The specific areas of concern were not immediately evident before, but now, the sourcing requirements outlined in legislation like the Inflation Reduction Act, combined with the frenzied competition for raw materials, processing power, and manufacturing capability, have left automakers scrambling to find solutions.

While auto companies are engaging in agreements and partnerships to mitigate the impact of supply chain disruptions, the road to EVs is undoubtedly going to be fraught with challenges. The fierce competition within the industry, coupled with the complexities of the battery supply chain, will test the resilience and perseverance of automakers as they navigate this new era of electric mobility.

• Automakers
• Electric Vehicles
• Transportation