Why just making batteries is not enough for UK’s car supply chain

Just as restaurants tout reduced food miles by local sourcing, so the UK car industry is looking for suppliers closer to home as it overhauls its purchasing in the EV era. Much of that is driven by legislation, specifically Brexit. The deal agreed with the European Union, the UK's biggest market, calls for a gradual decrease in parts sourced from outside the UK or EU from 60% now to 45% by the start of 2027. Given that the battery in a modern EV might account for half the value of the car, the race is hotting up to find local replacements for a supply base that is currently dominated by Asian producers. For Autocar Business webinars and podcasts, visit Autocar Business Insight It becomes even more urgent given that the value of UK-sourced parts for internal-combustion-engine cars is already low, at around 25% of the total. The UK already has two new battery plants confirmed, both close to Newcastle, north-east England, that combined will come close to providing the 60 gigawatt hours of batteries industry lobby group the SMMT estimates we need by 2030. But making the battery cells alone isn’t going to dramatically increase local content or boost our automotive economy. (Cell making is relatively low margin.) For that, we need to get involved in materials that make the cells – and that’s much harder. The most expensive part of a cell is its cathode, the metallic elements that attract lithium ions from the anode and so generate electricity. The cost of the so-called cathode active material made of metals such as nickel, cobalt and magnesium, plus the lithium, can represent around 40-50% of the cell cost, according to Jon Regnart, automotive trend strategist at Advanced Propulsion Centre UK (APC), a government-funded body that is trying to refocus the UK's supply chain to fit the needs of car makers moving to EVs and other future technologies. These cathode active materials have such an impact on cost that the UK's free trade deal with the EU decrees we have to source these from the UK or mainland Europe for the cell to be considered to be originating from the UK – ie the UK didn’t just import them from Asia (where the vast majority are currently made). Currently, the UK makes no cathode active materials, which is a huge problem given that we are banning sales of new internal-combustion-engine cars by 2030 and hybrids by 2035. The UK’s Johnson Matthey was going to produce nickel-rich cathode materials but abruptly pulled out last November, citing “increasing commoditisation and lower returns” in the market. In other words, they couldn’t compete with the sheer scale of global players. One big problem is getting hold of raw materials. Mining is a relatively low-value activity in the whole battery value chain, according to APC figures, but it does get you on the ladder and it does give you control of those materials. The UK “does not have abundant reserves” the Faraday Institute, a government-funded battery promotion body, told MPs last year, but lithium is one area we could exploit. Two producers, British Lithium and Cornish Lithium, are busy trying to turn a vast area of lithium-rich granite in south-west England into usable material for battery makers. A Tesla-sized EV contains about 40-50kg of lithium in its battery and we need around 70,000 tonnes by 2035 to feed our battery plants, Jeremy Wrathall, founder and CEO of Cornish Lithium believes. Of that, Cornish Lithium hopes to upply around 5000-10,000 tonnes annually, enough for 100,000-200,000 EVs, with British Lithium aiming at around 20,000 tonnes annually. “If we rely on China, where most of the lithium is produced, that’s not a good position to be in,” Wrathall said. “There's a huge amount of lithium in Cornwall,” Wrathall said, before cautioning that while the granite mass lying from the Scilly Isles to Dartmoor might contain billions of tonnes, that doesn’t mean it’s all economically viable to extract it. Rising prices will help. Lithium carbonate prices leapt by 420% between January 2021 and January 2022 to a truly dizzying $50,000 per tonne, according to S&P Global Platt’s. “What that’s showing is there's a shortage of supply,” Wrathall said. Also that everyone’s rushing to secure that supply ahead of a wholesale shift out of internal combustion engines. “It’s almost as if you’re Bronze Age man trying to work out what the price of copper is,” he said. The company would refine the lithium into battery-friendly carbonate or hydroxide itself, capturing another slice of the battery value chain. Cornish Lithium hopes to start supplying cathode makers in 2025/26 “with an extremely fair wind”, Wrathall said. Right now, that cathode maker would be outside the UK. “For the next stage, what we definitely need in the UK is a cathode manufacturing plant,” Wrathall said. The UK can supply a few other pieces of the cell-making jigsaw. Phillips 66 makes needle coke, an element of the anode side of the battery, at its Humber Refinery. The fact that it’s a byproduct from petroleum refining suggests this is perhaps not a permanent solution. In South Wales, meanwhile, Vale refines around 40,000 tonnes of nickel a year from ore mined from Canada and Indonesia. The UK's main problem is the head start Asian makers have on any indigenous battery material suppliers, a problem that caused Johnson Matthey to throw in the towel. The solution is to look further ahead to what comes after the current generation of batteries and start researching, developing and patenting the new chemistries. As the Faraday Institute put it to MPs: “Capturing and developing next-generation battery and fuel cell technology in the UK will be critical to the competitiveness and health of the automotive industry and the associated supply chains.” Exploiting Cornwall’s lithium Right now, lithium mining mainly happens in Australia and the Andes, before it is refined in China. Cornwall Lithium reckons it can tap Cornish reserves from the granite the county sits on. Cornwall has been mined before, both for tin and for china clay, and it’s the abandoned pits near St Austell for extracting the clay that Cornish Lithium will dig from. Wrathall reckons the support from Cornwall council and from locals is strong, based on the potential boost in the economy once production starts in earnest from 2025, all going well. As well as extracting directly from the rock, the company is also investigating capturing it from the warm brine that runs underground. Cornish Lithium has a joint venture with a local geothermal company to convert that heat to electricity, theoretically allowing the company to make the lithium extraction carbon neutral, a big potential win as car companies start inspecting their battery supply chains for high CO2 and other polluting byproducts.