By: Darrin Duber-Smith
Raw materials. They are used in the products we buy, and when demand outstrips supply, they get to become very expensive. But most business-to-business goods are inelastic, and thus when the price goes up demand tends to stay the same. Let's take cobalt, a key component in batteries used in electric vehicles, as an example.
We don't think too much about cobalt, an element that sits between iron and nickel on the periodic table, but if you are making electric car batteries, the availability and price of this element is always on your mind. And as you may have guessed, there is currently a shortage of the metal, which could affect the price and availability of the electric batteries that are dependent on it. How big of a problem is this?
It's becoming a very big problem as an increasing number of companies commit to making electric vehicles. And it doesn't help matters that the vast majority of output is concentrated in the highly-unstable and ironically-named Democratic Republic of Congo while the refining is done by China. Ack! This political environment is not favorable to U.S. marketers, and probably the supply chain will eventually have to find a substitute for this environmentally-unfriendly and difficult-to-obtain metal. But the current technological environment doesn't allow for such a substitute. So for now, marketers are very worried about meeting demand.
There is a bright spot here. There hasn't really been very much demand for electric vehicles over the past decades, as consumers have been reticent to adopt the technology despite massive government subsidies and incentives. the demand that does exist is instead being driven largely by legal/regulatory and political considerations. And so if we don't have enough cobalt people will still be able to drive cars, albeit not as many of the electric ones that some politicians and consumers prefer. Indeed the supply chain will have to work around this long-term problem if it wants to offer meaningful volumes of electric vehicles for mass consumption.
The obvious solution lies in finding additional sources for cobalt beyond having to deal with a historically unstable region and China; or, better yet, finding one or more substitutes for cobalt that will make the industry rest a little easier. It doesn't appear that the electric car is going away, and so a solution must be found.
Discussion: Do you think that consumer desire for electric vehicles will increase? What are some of the barriers to adoption? Solutions?
You must be a registered user to add a comment. If you've already registered, sign in. Otherwise, register and sign in.