The Path to EV Supply Chain Independence in the U.S.

Electric vehicles (EVs) are in the spotlight and every industrialized country is looking for a piece of the pie. We’re at a pivotal moment in the transition to more sustainable forms of energy and transportation, and the United States is clambering to lead the pack.

There’s a problem, however, that promises to make EV production in the U.S. tricky at best. China, along with a group of other countries, is so much more advanced in this area, especially in lithium battery production, the keystone that powers many EV models on the road today.

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Lithium is the soft, silvery-white metal that provides ideal conditions for storing the energy required to keep EVs moving with maximum battery capacity. China and those other nations have a stronghold on the world’s lithium supply. As everyone is looking to capitalize on the sustainability wave and cash in on EV production, the one key challenge is meeting the fast-growing ambitions, especially in the U.S.

A Wealth of Competing Factors

This isn’t a new problem. The United States has been a lithium laggard since before 1995, and the gap has only been getting wider.

Australia, Chile and China source the majority of the lithium supply currently available. The list of countries in the EV production game includes China, the U.S., Canada, Mexico, Germany, France, Japan, and South Korea.

Given the American mission to minimize its dependence on non-domestic lithium, the competition will make it a challenge to get the current lithium pipeline to match up with its ambition for EV production. Politicians have made their intentions clear; they’re in a race against climate change to address one of the biggest contributing factors in greenhouse emissions, transportation. As a result, the U.S. is pumping a lot of money into the sector as it ramps up.

The Department of Energy’s public-private partnership, Li-Bridge, monitors this area closely and released this report in February. The conclusion they came to is somewhat jarring. The report says U.S. companies are so far behind in the lack of a strong lithium supply chain that it could easily turn into an economic and national security problem.

The Inflation Reduction Act is designed to address at least part of this. Enacted into law in 2022, the IRA provides billions of dollars to help ramp up EV production domestically, including battery production capacity.

While it’s an important step in the right direction, this lacks solutions of much needed immediate relief that would greatly aid U.S. efforts in the nearterm. Namely, supply chain management.

A Two-Pronged Approach

Making it even more of a challenge, China also owns the overall EV battery production category, meaning they lead all other countries in battery production capacity. They’re ready and able to produce far more batteries today with their starting line years and years ahead.

While the U.S. is looking to reduce its dependence on EV and battery supply needs from other countries sooner rather than later, doing that too soon could strike a major blow to these domestic EV ambitions.

If the U.S. is to ultimately win the race with its own domestic EV and battery supply chains, a two-pronged approach is critical, one that focuses on the near-term, and another focused on long-term advancement. The Inflation Reduction Act covers the long-term aspect of this well. But if competing countries continue getting ahead in the coming months and years, which they will, winning the race will be nearly impossible. This is why strong supply chain management is key.

The first stage of this EV race must be treated as a delicate balancing act, after all, relying on those you’re competing against, with the very same goals, is a “boiling the ocean” approach. Effective supply chain management will be the tactic that helps the U.S. make appreciable gains while long-term investment ramps up.

Getting Ahead Now is Critical

Despite the situation as it is today for the U.S., the EV race can be won. It’s a long-haul game, however. While government and enterprise work together to develop robust domestic supply chains, focusing on how to better navigate the lithium supply chains today will be key in getting ahead now.

General Motors is one of the many companies Resilinc works with, helping to navigate issues like this each day. Moving away from being reactionary, to being grounded in foresight and planning, utilizing preventative solutions, is a game changer.

Central to supply chain risk management is information; building resilience in supply chains hinges on deep, multi-tier mapping. As they say, “knowledge is power,” and it couldn’t be any more true here.

With subtier mapping, manufacturers and the companies they work with know exactly what materials and parts could be delayed. They’re able to view potential risk events in real time, such as a fire at the factory, significant weather, an ESG violation, or other issues affecting specific sites. They are also able to glean information about particular activities a location performs, alternate sites available to the supplier, and the time it will take the supplier to begin shipping from an alternate site. It’s tried and true, and it’s the most effective way to ensure continuity of supply.

Along with mapping, monitoring your supply chain, being on the lookout for coming disruptions, gives the time required to pivot and minimize the impact. EventWatch AI from Resilinc is one such early-warning system. It’s a 24/7, real-time alert system, covering more than 500 types of disrupting events and sub-events. EventWatch gives actionable insight that can positively impact an organization’s supply chain ecosystem.

Supply Chain Risk Management Works

Case studies tell the story here. One in particular is from a global biotech company that put part-site mapping into action, avoiding supply disruptions in the aftermath of Hurricane Maria, which devastated Puerto Rico in 2017. In the days before Maria made landfall, the group was able to identify sites that supplied items to its North American operations. With a strong indication that these sites would have issues staying operational, they made millions of dollars worth of forward purchases from different suppliers, ultimately averting what would have otherwise evolved into costly manufacturing delays.

At the same time, other similar companies were left scrambling in the weeks after Maria, trying to analyze the impact on their suppliers. In the end, these companies faced allocations and paid large premiums to secure the needed inventory.

Here’s another story, of an electronics manufacturer in the U.S. that sells high-performance components to equipment manufacturers in a wide range of industries. This company operates its own plants around the globe, including in the U.S., and also relies on hundreds of suppliers and manufacturing subcontractors.

This manufacturer received an EventWatch alert on Jan. 4, 2020 about the potential of a “flu-like” illness in China to cause potential supply chain issues. The particular area, Wuhan, is a major hub for manufacturing, including NAND flash memory, optical electronics, computer chips, pharmaceutical ingredients, and other critical parts and materials. The company, a partner of Resilinc, was able to take this information, and within minutes, was able to identify sites in Wuhan where its materials were produced.

Using these automated tools, this manufacturer was able to quickly generate a list of critical suppliers in the affected areas, communicate with those suppliers that were most critical, and determine changes that needed to be implemented to avoid the worst fallout.

—Bindiya Vakil is founder and CEO of Resilinc.