The importance and benefits of simplifying the electric vehicle battery supply chain for OEMs

By James Eaton, CEO of IONETIC, a UK-based start-up specialising in electric vehicle (EV) battery pack technology

Currently, 27% of global CO2 emissions come from transport, meaning that as we work to become more environmentally friendly, the relevance of electric vehicles will continue to increase dramatically in our efforts to hit net zero.[1]  With the EU announcing an additional investment of €382 billion earlier this year, EV battery production is expected to grow eightfold by 2030, putting planned European annual capacity high enough to produce over 14% of the predicted global total.[2]

From 2027 all new electric vehicles in Europe must have a battery pack that is made in Europe. This is an extension to the existing Rules of Origin – a regulation which determines where a product was sourced or made and ensures that businesses benefit from lower duties accordingly – which requires 40% of an electric vehicle to be locally made. As a battery pack is such a large proportion of an electric vehicle, this is where the burden mostly lies. To ensure that this demand is properly met, supply chains must be onshored.

By onshoring supply chains, OEMs are opening themselves up to a vast array of benefits. Having companies producing components near each other can make a big difference in terms of the working capital that OEMs need to operate their businesses. With faster shipping times, shorter supply chains are sheltered from the long delays that can impact revenue and can see increased cash flow as a result.

There is also less of a perceived risk when a supply chain is onshored. Being physically closer to your suppliers means that problems are easier to fix when they occur and can be solved more quickly. Being able to easily meet with your suppliers can prevent small problems from stretching out into multi-day problems which can stall business.

There are many stages needed to get a battery pack into production. Automotive companies need to consider requirements, system design, homologation, embedded control, manufacturing options, and vehicle integration, to name a few. Having one company deliver all these steps, which is what we do at IONETIC, means that the OEM can fully reap the benefits of a simplified supply chain – namely reduced costs and products delivered in less time. It’s also worth noting that working with a simplified supply chain means companies are less likely to be affected by any additional tariffs that may come with changes to rules of origin.

To conclude, a simplified supply chain means that manufacturers are able to be more nimble. This means that cash flow is easier to manage and scaling up can happen more rapidly – and if we are to hit our net zero targets, we need to foster a trading environment that makes commerce as easy as possible.

[1] Data from the EPA – https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

[2] Data from the European Commission – https://ec.europa.eu/commission/presscorner/detail/en/QANDA_22_1257