The world is undergoing a transition to a net-zero economy with technological development driving this change. Energy generation and transportation have received great attention as they together account for about half of global greenhouse gas emissions1. In terms of CO2 emissions, transportation generates one-fifth of the total, with 75% of that coming from road vehicles2. This makes electric vehicles (EVs) instrumental in reducing the overall environmental impact generated from road transportation. To support the expected increase in demand for EVs, the supply chain needs to be strong and resilient to exogenous shocks.
From a technological perspective, EVs are simpler in design compared to their internal combustion engine counterparts, with significantly fewer moving parts. However, they require substantially more mineral resources for their motors and batteries. For automakers, batteries present a key technological challenge as their design shapes the key characteristics of the vehicle and determines the minerals required to manufacture it.
At present, mineral-intensive lithium-ion batteries are the industry standard. Focused R&D efforts have led to an increase in battery density, longer cycle life and reduced average costs, falling by 90% since 20103. Yet, the cost of the battery pack is by far the most expensive manufacturing expense of an EV. On an average this cost was estimated to be at $6,300 in 20214, representing one-third of the total vehicle cost5. To better understand the economic dynamics behind this, it is imperative to understand the structure of a lithium-ion battery.
Each EV houses a battery pack comprising multiple battery cells and control electronics within an aluminium or steel casing for protection. A battery cell contains two electrodes — a cathode and an anode — separated by a plastic separator. A lithium salt solution facilitates the movement of ions between the electrodes, with current collectors made of aluminum and copper for the cathode and anode, respectively, collecting and conducting electrical current. The chemistry of the electrodes principally affects the battery’s characteristics, including energy density, charging speed, lifespan, operating temperature, flammability and cost.
The chart below shows the varying proportions of minerals used in the three leading lithium-ion battery chemistries. Automakers choose a chemistry that best serves the EV’s intended purpose. For instance, NMC batteries are used for high-performance EVs for their superior energy density, despite their higher costs. In contrast, LFP batteries, which have nearly half the energy density, are preferred for entry-level EVs due to their lower cost and longer lifespan.
Regardless of their chemistry, lithium-ion batteries have a long and complicated supply chain involving globally dispersed actors performing specialized activities from mining to the their integration into EVs. The decentralized nature of these activities, coupled with the diversity in mineral inputs results in extensive international transportation. Minerals travel an estimated average of 50,000 miles from mining sites to their use into cell manufacturing6. To put this into perspective, the EV battery supply chain can be divided into three main stages: upstream, midstream, and downstream.
The upstream stage involves mining the mineral ores necessary for creating battery components from reserves. While the specific minerals required depend on the battery chemistry, critical minerals like graphite and lithium are essential. The midstream stage involves processing mined mineral ores, refining them to battery-grade quality, converting them into components and then into battery cells by their manufacturers. In the downstream stage, these cells are assembled into large battery packs, integrated with control electronics and installed into EVs. Finally, at the end of its life, the battery ideally undergoes recycling, where its minerals are recovered and recycled to create new batteries7.
Although a large majority of batteries are not currently recycled, there is significant potential for improvement. Reusing minerals to manufacture new batteries saves the energy expended on mining for virgin minerals and enables companies to mitigate challenges further upstream8. Additionally, dampening demand for critical minerals like cobalt also reduces environmental and social impacts, such as hazardous working conditions and issues like child and forced labor9.
The interactive chart below shows the top 5 producers of the minerals typically used in EV batteries, with anodes on the left and cathodes on the right. Except for steel, every mineral used is classified as critical — essential for economic or national security, with supply chains vulnerable to disruptions — in Canada10. While the dataset used does not specify the grade of the minerals, which is important, it still highlights the uneven distribution and production of these minerals. This is particularly evident in the production of graphite, lithium, cobalt, phosphate and aluminum, where a single country often controls the majority of supply.
A second drawback of the dataset is that it does not identify foreign ownership of mines, such as the Tenke Fungurume Mining (TFM) copper-cobalt ore project in Congo, where China holds an 80% equity stake11.
Economically viable reserves of these minerals are often concentrated in the hands of a few suppliers in politically unstable countries with poor records of upholding human rights and environmental standards. For countries seeking to diversify their supply, opportunities for certain minerals exist but establishing new mines can be a lengthy process. For instance, approximately 20% of the world's lithium reserves are located outside the top 5 producers, offering potential for supply diversification. A similar situation exists for phosphate, with significant reserves found in Morocco. However, igneous phosphate, which is most suitable for LFP batteries, is primarily found in Canada, Russia, and South Africa12.
On the flip side, battery chemistries and designs are continually evolving. In lithium-ion batteries, anodes are typically graphite, while cathode chemistry varies widely. LFP batteries, which avoid the use of nickel, manganese and cobalt, are gaining market share due to improvements in energy density and performance. However, for countries seeking to de-risk their EV battery supply chain, China also leads in the development and manufacture of LFP batteries, controlling over 95% of global production13. With widespread adoption in the Chinese market, 4 in 10 EVs produced in 2023 were powered by an LFP battery. Another potential disruption could come from sodium-ion batteries, which avoid the use of lithium in favor of nickel or manganese, depending on the chemistry14.
Looking further downstream, China's dominant position in the EV battery supply chain becomes more apparent. While mineral extraction is somewhat geographically diversified, the processing of these minerals into materials suitable for battery parts is highly concentrated in China. More than 50% of graphite, lithium, manganese, cobalt and aluminum processing occurs there. This trend continues in cell manufacturing, with China producing approximately 70% of all cathodes and about 85% of all anodes. The conversion of cells into battery packs is also heavily concentrated in China, accounting for over 75% of global production. Finally, China manufactures approximately 1 in every 2 EVs produced worldwide.
As broader geopolitical issues affect economic and trade relationships, the stability of global supply chains is increasingly at risk when an outsized share of any activity in the EV battery supply chain occurs in a single country. Such bottlenecks can have negative consequences as countries increasingly weaponize their control over key activities in the supply chains of critical goods15.
To reduce the risks generated from over-reliance and to build resilience, investments are being made in Canada, the US and Europe across the EV battery supply chain to localize and develop domestic capacity, which is crucial for a successful green transition. Furthermore, the environmental and social impacts of upstream activities in the EV battery supply chain have spurred interest in securing ethical supplies. Greater investments are needed to ensure transparency and prevent malpractices by suppliers.
The shorter than expected lifespan of batteries and the challenge of achieving circularity through recycling are also significant issues that need to be addressed. While experimentation with battery chemistry has enabled LFP technology to regain competitiveness, the lack of valuable minerals makes their recycling unprofitable16. In the mean time, due to the nature of the industry, EV battery production is expected to remain dominated by China for the foreseeable future.
References
1. Ritchie, Rosado and Roser (2020). Breakdown of carbon dioxide, methane and nitrous oxide emissions by sector. Our World in Data.
2. Ritchie (2020). Cars, planes, trains: where do CO₂ emissions from transport come from?. Our World in Data.
3. IEA (2024). Batteries and Secure Energy Transitions.
4. Stinger and Park (2021). Why an Electric Car Battery Is So Expensive, For Now. Bloomberg.
5. König et al. (2021). An Overview of Parameter and Cost for Battery Electric Vehicles. World Electric Vehicle Journal.
6. Straubel (2022). The scope and scale of critical mineral demand and recycling of critical minerals. U.S. Senate Committee on Energy and Natural Resources.
7. Brinn (2022). Electric Vehicle Battery Supply Chains: The Basics. NRDC.
8. Reinsch et al. (2024). Friendshoring the Lithium-Ion Battery Supply Chain: Battery Cell Manufacturing. CSIS.
9. Carreon (2023). The EV Battery Supply Chain Explained. RMI.
10. Government of Canada (n.d.). Canada's critical minerals.
11. Tang and Chen (2023). China's CMOC, Gécamines reach resolution on DR Congo copper-cobalt mine. S&P Global.
12. Banerjee (2023). Characterization of First Phosphate’s Lac à l'Orignal Phosphate Deposit, Lac- Saint-Jean Anorthosite (LSJA) Complex, Quebec, Canada: Implications for Supplying Lithium Ferro (Iron) Phosphate (LFP) Batteries. Queen's University.
13. IEA (2024). Batteries and Secure Energy Transitions.
14. IEA (2024). Trends in electric vehicle batteries.
15. Luo and Van Assche (2023). The rise of techno-geopolitical uncertainty: Implications of the United States CHIPS and Science Act. Journal of International Business Studies.
16. IEA (2022). Global Supply Chains of EV Batteries.
