Once a niche market, electric vehicles, or EVs, are becoming more popular among drivers around the world. In fact, global EV sales have skyrocketed over the last five years, increasing nearly eightfold in that short amount of time.
It’s great news for automakers—and for the environment. However, while electric-car makers are speeding ahead, so too is a glaring problem for industry leadership: a shortage in nickel sulfate, the emerald-green crystalline material used in EV batteries.
There’s a reason why nickel is a popular choice for this type of battery: the precious metal delivers higher energy density and greater storage capacity. But according to some estimates, demand for nickel is starting to outstrip its supply—and could surpass production by 2035. “If nickel is scarce, then what’s plan B?” says Matt Stencil, a senior client partner at Korn Ferry and a member of the firm’s Industrial practice in North America. “Where do you go so you can keep innovating?”
It's a critical question that auto leaders will need to ask themselves today if they want to keep up with the swelling demand for electric vehicles, experts say. After all, the energy research firm BloombergNEF expects global electric-car sales to reach 28 million by 2030. Fewer than 2.1 million were sold in 2018.
Making sure an organization can pivot quickly in order to source alternative materials to deal with critical shortages will be crucial to success, experts say. And not just with nickel: demand for lithium and cobalt, two other materials used in electric-car batteries, are also beginning to outpace their supply. “These materials are finite,” Stencil says. “So, how is the supply shifting so it doesn’t kink up product flow?”
To that end, battery manufacturers will also have to confront the nickel supply crunch and think of new innovations if they want to remain competitive suppliers, experts say.
Indeed, one study found that in order for electric-car sales to meet forecast levels, battery-manufacturing capacity would have to increase threefold in the next year. But, right now, battery technology is “not sufficiently advanced,” says Rory Singleton, a senior client partner in Korn Ferry’s Global Industrial Markets practice. “The pace of development in the battery market is not where it needs to be to keep pace with electric-vehicle growth,” he says.
Improving battery technology doesn’t only serve to answer the nickel shortage. The precious metals found in electric-car batteries are sourced from a handful of regions, some of which are gripped by geopolitical instability. That means leaders whose companies are reliant on nickel, cobalt, or lithium also have to carefully navigate political and economic relationships in order to keep up supply, experts say. “The risk dimensions are multiple,” Singleton says. Given these challenges, he adds, leaders will need to explore viable alternatives to reduce their dependence on these metals in the near term.
Indeed, the lessons resonate for the heads of many industries facing similar resource challenges: the need to be more flexible and agile in how to innovate, develop, and operate. “There needs to be a mindset that isn’t fixated on one answer, but focused on considering multiple solutions,” Singleton says.