Asia’s EV supply chain drive in mass adoption pose challenges

Shifting from gasoline-powered vehicles may seem far-flung before in Asia, but the roll-out of electric vehicles (EVs) has now become a significant supply chain drive in the continent.

Based on the Global Electric Vehicle Outlook of the International Energy Agency (IEA), about 16.5 million electric cars are in roads across the world. Such is the case in 2021 and it has tripled compared to 2018. Half of the said number is from China.

Although most mature auto markets experienced double-dips in sales in 2021-2022. EV sales still outperformed by 21% in Europe, 87% in China, 55% in Northern America, and 78% in non-triad economies.

The adoption of EVs is a crucial supply chain drive in Asia. It was being encouraged by both the government and private sectors. Despite this, the electric vehicle supply chain has to face significant challenges as a budding industry.

Battery supply and its parts

The battery is the most costly part of the EV supply chain modeling structure. It accounts for around 40% of an EV’s entire price.

Since lithium-ion batteries are light, compact, and have a large energy capacity, EVs mostly have them. Lithium, nickel, and cobalt are crucial raw elements for producing these batteries.

According to the annual Global Electric Vehicle Outlook of the International Energy Agency (IEA), lithium prices were roughly seven times higher in May 2022 than in 2021.

“Policymakers, industry executives, and investors need to be highly vigilant and resourceful to reduce the risks of supply disruptions and ensure sustainable supplies of critical minerals,”

said Fatih Birol, Executive Director at the International Energy Agency. 

Currently, China manufactures 75% of all lithium-ion batteries. The country has an 85% manufacturing capacity for anodes and 70% capacity for cathodes. Both of which are crucial parts of batteries.

Nickel and cobalt prices also becomes higher. If these costs remain at their present levels, the cost of battery packs might rise by 15%. Meanwhile, since Russia produces 20% of the world’s nickel for battery use, the Russia-Ukraine’s war has put pressure on the EV supply chain drive.

More than half of the world’s capacity for processing not just lithium, cobalt, and graphite, is in China. However, due to supply chain distribution delays in China, the price increases for several vital minerals required for battery production.

Such situation was due to Covid-19 in China. It also led to higher EV costs than traditional internal combustion engine vehicles, which may hinder many EV distributors.

To become resilient, EV producers must develop innovative supply security and sustainable management techniques. These include vertical integration, strategic partnerships, local supply bases, and battery chemistry innovation.

Standardized EV charging

The EV market’s biggest challenge is the need for more standardized charging systems to usher mass EV supply chain drive across Asia. Given that an EV relies on electricity, this takes a toll on its marketing.

“The standard system of electric vehicles and charging systems in the world is diverse and continues to be developed. Each country, based on its conditions, chooses and builds an appropriate system of standards,”

said Pham Tuan Anh, deputy director of the Department of Industry at the Ministry of Industry and Trade (MoIT), Vietnam.

As a growing industry, the worldwide market for EV charging may reach a value of around USD 190 billion. Such is nearly one-tenth of the market for diesel and gasoline today.

At present, public charging stations may not be enough to support the scale of the EV supply chain distribution. Infrastructure efficiency and the nature of deployment depend on regional specifics.

Some supply chain studies show that the construction of EV charging infrastructure in Asia has increased in recent years as more countries look to promote sustainable transportation. For example, China has already made notable progress.

“China had more than 1.1 million publicly accessible electric vehicle chargers in 2021, accounting for over 65 percent of such chargers worldwide,”

shared Mathilde Carlier, Research Expert from Statista, an international database company.

South Korea also has a number of public charging stations at 106,701 where 15,067 are capable of doing rapid charge. Private companies such as Hyundai and Kia have invested in EV charging network development to support the EV supply chain drive in Asia.

However, EV charging infrastructure still faces some major challenges for supply chain models in Asia. First, the production costs of the said infrastructure can be expensive. Therefore, private companies and governments may only be willing to invest once there is a larger market for EVs.

Second, stations where EV owners can charge also need a construction place. Such may be difficult, particularly in urban areas where there may be limited space and complex regulations.

In order to ensure the success of EV supply chain simulations and that every community would be covered in the transition, there should be a continuous provision of government support. Regardless if it’s through legislation relating to the construction of charging stations or by subsidy.

Governments should continue to promote the implementation of publicly accessible charging infrastructure. Also, enough charging infrastructures across Asia should be erected.

Diving deeper into adoption and promotion

The EV supply chain drive will take a while, but it can’t be denied that recent progress is paving the way for the EV supply chain distribution’s promising growth in Asia. Despite the challenges, governments and private companies in Asia are doing EV-related efforts. In which, the aim is to develop new technologies, improve EV supply chain management, and build out charging networks.

The mass adoption of EVs has significant implications globally and in Asia. It addresses the global challenge of climate change by reducing greenhouse gas emissions and improving air quality.

Additionally, EVs support energy security by lessening oil demand. It also creates new jobs that could boost the economy and support local communities. Hence, EV supply chain stakeholders need to work together to address the challenges of EV adoption.