How the Supply Chain can Help us Reach the EV Tipping Point

How the Supply Chain can Help us Reach the EV Tipping Point

January 21, 2022

How the Supply Chain can Help us Reach the EV Tipping Point

Some say we are all creatures of habit (and the older we get, even more so!) but when it comes to technology, people still get excited by tipping points. It’s that moment when everything changes and what was once considered a ‘fad’ becomes a trend.

Maybe it feels ambitious to say that we aren’t too far from that moment when it comes to electric vehicles (EVs) with them accounting for only 4% of total vehicle sales globally in 2020, according to  the Global EV Outlook by the International Energy Agency (IEA), but we are closer than we think.

And the supply chain can help us get even closer.

A massive shift over the past ten years

The same publication outlines that, until 2017, there were only 100,000 EV sales per year (out of a total of 16 to 17 million new vehicles). The success of Tesla prompted a radical change in 2018 and there are now over 300 EV model types. This, coupled with a burgeoning car-as-a-service model, indicates an even greater shift ahead of us.

The cost gap between EVs and internal combustion engine (ICE) vehicles is also closing fast. According to BloombergNEF, the average battery price continues to decline, now standing at US$137 per KWh, and constant improvements are being made to battery life and range.

This is an important piece, but not the full picture.

EV policy top of the agenda at COP26

As a society, we are faced with a much more sinister tipping point, that of irreversible global warming. COP26 may be a few months behind us now and front-page news has moved on to other things, but let’s not forget how essential government support is in this process.

I was delighted to see road transport at the top of the COP26 agenda. With 10% of transport emissions relating to personal vehicle use, clarifying policy around EV transformation was a key discussion point. Governments and public institutions need to offer clear zero-carbon policy statements and strategies, providing the necessary reglementary framework and tackling fundamental issues such as charging infrastructure. Without this clarity, consumers lose confidence.

Rigorous climate change and clean air regulations have certainly accelerated and are now becoming a reality. Clean Air Zones in many cities are already making diesel, and even the latest petrol cars, unusable and governments are stepping up in other ways too. Here in Europe, the UK has declared to allow sales of only non-carbon vehicles by 2030 - five years earlier than planned - and the EU’s latest Transport Strategy targets 30 million EVs on the road by 2030, with no carbon-fueled vehicles at all by 2050.

But can manufacturers and policy makers do it all? I’m not refuting the technological advances made, nor the progress of governments worldwide to edge us that bit closer to the much desired EV tipping point. Far from it. What I am debating is whether manufacturers are anticipating the massive disruption that EV adoption entails in the supply chain.

Batteries, batteries and more batteries

Lots of people focus on two things for a tipping point to happen in the EV market: better developed charging infrastructure and consumers no longer having to pay a premium to purchase an EV. But as we improve gradually on both these points and governments set their policy frameworks, we are producing more and more batteries.

In fact, projections by Bloomberg NEF suggest over 80 million new EV or hybrid vehicle sales each year by 2040. That’s an estimated 80 million batteries to produce and transport annually.

As a reliable partner of the automotive supply chain, at CHEP we understand not just how it works, but also how it is changing. The unprecedented disruption of the automotive industry entails a hidden and equally unprecedented disruption of this old and very established supply chain.

Are OEMs and battery suppliers ready for that?

Lithium-ion batteries are by far the most widely used batteries in EVs. If they are in any way damaged, mishandled or subjected to too much heat, they can leak, release toxic gases, self-ignite or even explode. Three major car manufacturers’ made news this year when they had to recall defective battery packs. Involving 132,500 vehicles in total, it represented an estimated combined cost of over US$2bn.

Categorized as Class 9 Dangerous Goods (Packaging Group II), strict safety regulations are therefore in place to ensure that EV batteries follow a specific transport and packaging process. That packaging must be UN-certified and meet far higher requirements than those in place for the transportation of standard car parts.

Sustainable packaging solutions also edge us closer to that EV tipping point

To ensure we make that EV tipping point, the supply chain must therefore evolve too, and if the future is to be sustainable – we are, after all, moving to EVs to ensure the future of this planet - we cannot be looking at single use solutions either. It makes no sense.

Put simply, if EVs are the route to sustainable transport, then the new automotive supply chain must also be sustainable.

Reusable container packaging for EV batteries, like CHEP’s solutions, offer first and foremost more protection than standard cardboard alternatives. More shielding from the elements, less stacking damage and less overall handling allows for less damage and loss in transit, and the cost that incurs.

Secondly, designing cells and modules around UN-certified reusable and standardized containers offers a higher packing density, greatly optimizing sea container packing. A second cost saving.

That’s the beauty of investing in sustainable, re-usable, fully adapted battery packaging. By optimizing the battery supply chain in this way, we also make another critical step towards the EV tipping point in terms of making EVs affordable for the consumer. One-way packaging is not only less protective, but also more expensive. External experts have confirmed to us that one-way cardboard packaging for a full battery pack can cost between US$300-500.

That’s currently 7% of total battery cost.

No one can do it alone.

The progress made in the past ten years towards sustainable personal transport solutions is admirable. I am convinced that the next ten years will take us even further again.

But to optimize that progress, we all need to step up to the plate. As of now - be it automotive OEMs, battery manufacturers, supply chain partners like CHEP or governments - we all need to work together to move from a linear to a circular mindset. In moving from degenerative to regenerative processes, we can envision a truly sustainable chain for the new automotive industry.

Are you ready to join us?

Blog Author

Murray joined CHEP in November 2017 as Vice President of CHEP Europe, Automotive and Industrial Solutions. Since July 2020, Murray has overall responsibility for the financial and commercial performance of the Automotive business within the European and North American regions, collaborating closely with the Country General Managers of the local businesses to ensure both strategic & operational alignment.

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How the Supply Chain can Help us Reach the EV Tipping Point | CHEP