EV automakers need to consider difficult sourcing decisions globally
EV supply chains are complex, with many components sourced from a range of suppliers around the world. This can make it difficult for automakers to trace the origin of materials and ensure that they are responsibly sourced. Many of the raw materials used in EV batteries, such as lithium and cobalt, are sourced from a limited number of countries and this can lead to supply chain bottlenecks and increase the risk of price volatility. The increasing demand for EVs is putting pressure on the supply of raw materials, which can lead to supply chain disruptions and price increases.
The lack of transparency in supply chains can make it difficult for automakers to ensure that their suppliers are adhering to responsible sourcing practices. This can increase the risk of human rights violations and environmental damage. Sourcing responsibly can be more expensive than sourcing from less reputable suppliers and this can put pressure on automakers' profit margins, especially as the cost of raw materials is already high.
To address these challenges, EV automakers need to take a proactive approach to responsible sourcing. This involves working closely with suppliers to ensure that they adhere to responsible sourcing practices. Automakers can also invest in new technologies that reduce the number of raw materials required in EV batteries and explore alternative materials that are more sustainable and readily available. In addition, automakers can collaborate with industry associations and governments to develop a more transparent and sustainable supply chain for EVs.
The U.S. Treasury Department recently updated the rules for electric vehicle (EV) tax credits under the 2022 Inflation Reduction Act, stirring up a bit of a storm.