Addressing packaging challenges whilst the new EV supply chain settles
As the world confronts the problem of soaring CO2 emissions, EVs are hailed as one of the solutions. And figures from the first quarter of 2022 show that sales are booming, with Volkswagen tabling 99,100 sales and a growth rate of 65% and Tesla 310,411 sales and a growth rate of 81%. In April 2022, Ford even announced a monthly growth rate of 139% with 16,779 units sold thanks to the Mustang Mach-E and the recent launch of the E-Transit.
High oil prices and tax incentives are certainly helping, but for EVs to truly dominate the consumer market, they need to be both affordable (without needing to incentivize their purchase) and as easy to use for consumers as traditional Internal Combustion Engines (ICE) vehicles.
Today, batteries can make up a quarter to a third of the cost of electric cars, and industry data shows that lithium battery cells have already increased in price per kilowatt hour compared to last year. Backed by significant financial and technological support from both the private and public sector, the race is on to find the golden egg: a battery that can charge faster, hold more energy and be less likely to overheat than current batteries.
In this race, two important phenomena are generating disruption upon disruption in the automotive supply chain.
- Battery sizes and technology are perpetually evolving
Maybe current battery technology doesn't always meet the range and performance demanded by consumers, but I have no doubt that one day it will.
Manufacturers are recognizing the need to increase efficiency across the board, but lithium shortages keep making the news in 2022. Carmakers such as Volkswagen have already announced selling their annual inventory as they don’t have the batteries to manufacture more vehicles.
Research to find alternate technologies is underway around the world. Lithium iron phosphate is a popular technology in China – a cheaper solution that stores as much energy per pound and offers more range – and companies are breaking into new territory, like GM with claims that its Ultrium battery cell needs 70 percent less cobalt than the cells used in the Chevrolet Bolt electric hatchback. This is without mentioning research underway into solid state batteries.
Tomorrow’s batteries will look nothing – be it in size or composition – to what is produced and transported between suppliers and OEMs today.
2. Supply and demand may also shift
The EV battery supply chain is China-centric at present, with even Tesla relying on Asian suppliers and seeking to bring more manufacturing in house. Even if other countries may have the lithium reserves - including the US - getting them out of the ground is costly and time consuming, and China already has a significant head start. BloombergNEF sees China’s success as resulting from its large domestic battery demand, 72GWh, as well as its current control of 80 percent of the world’s raw material refining, 77 percent of the world’s cell capacity and 60 percent of the world’s component manufacturing.
But heads of State - like President Biden – are encouraging companies to move more of the battery supply chain closer to the Original Equipment Manufacturer (OEMs). The strategic importance of such efforts has also been underlined by the Ukraine conflict, with Volkswagen forced to temporarily shut down its main electric vehicle factory in Germany when fighting disrupted the supply of parts made in western Ukraine.
So, even with China’s impressive head start, technologies are evolving to a backdrop of political determination to restructure the EV battery supply chain. Where we will make tomorrow’s batteries could evolve too.
Where does this disruption leave OEMs and battery makers?
Coming back to my opening statement, we talk a lot about how EVs are hailed as the answer to our climate problems. But in one challenge lies another: how to ensure a net-zero supply chain to support this transport transition. EVs cannot be a sustainable answer to our climate problems if their manufacturer generates a sizeable carbon footprint.
And yet what today we are witnessing most OEMs still using one-way wooden or cardboard packaging in the EV supply chain rather than investing in more robust and reusable alternatives.
But isn’t that also understandable considering the phenomena described above? It’s risky to invest in sustainable reusable packaging, when the future shape, composition and provenance of its main component – the battery - is a moving feast.
What’s the answer?
When faced with a situation in constant flux, the answer is to be found in agility.
With so many parameters to battery development, rather than waiting for the dust caused by this disruption to settle, an answer can be found in developing bespoke packaging solutions that are flexible enough to evolve with the automotive industry over time.
Part of the problem, in any case, will always be standardized: shipping and trucking containers follow standardized dimensions. At CHEP, recycled and reusable plastic containers have already been designed to optimize transportation volumes and alleviate empty transport miles.
Moving forward, we are tackling the non-standardized part of the problem by working with our customers to develop bespoke and adjustable thermoformed trays and inserts to optimize the loading of those same containers. These inserts can be easily redesigned over time and are cheaper and quicker to replace than the plastic containers themselves.
Savings for carmakers and for the planet
Using the CHEP pooling service rather than investing in their own containers, our customers already save an estimated 20 percent in transport costs, over 40 percent of which is thanks to no longer transport empty containers. Taking this one step further, using IcoQubes and bespoke durable inserts, we have worked on transport solutions between China and Japan, for example, that have also reduced warehouse costs by 32 percent and improved sea container utilization by 15 percent.
And this brings us to the most important point, and my conclusion. The reduction of CO2 emissions by optimizing container space makes a direct and positive impact on the future of our planet, as does the total eradication of landfill waste that also resulted from the above example.
In their Supply Chain Predictions 2022, Gartner speaks of “good intentions” but “missed commitments” when it comes to sustainable packaging. Bringing circularity into our packaging solutions – be it reusing, recycling, or sharing – is recognized as integral to meeting our net-zero ambitions. And yet, most companies will fail to meet their commitments for all packaging to be reusable, recyclable, or compostable by 2025.
With the recycling infrastructure far from mature and reusing often difficult when dealing with anything other than intra OEM shipments, a collaborative, pooling solution can offer the path towards a net-zero supply chain.
Modular, bespoke inserts allow us to start our net-zero transition today rather than waiting for the dust to settle and reveal what shape a mature EV supply chain will take.