As tensions mount between China and the
United States, automakers in the West are trying to reduce their reliance on a
key driver of the electric vehicle revolution – permanent magnets, sometimes
smaller than a pack of cards, that power electric engines.Most are made of rare
earth metals from China.
The metals in the magnets are actually
abundant, but can be dirty and difficult to produce. China has grown to dominate
production, and with demand for the magnets on the rise for all forms of
renewable energy, analysts say a genuine shortage may lie ahead.
Some auto firms have been looking to
replace rare earths for years. Now manufacturers amounting to nearly half global
sales say they are limiting their use, a Reuters analysis found.
Automakers in the West say they are
concerned not just about securing supply, but also by huge price swings, and
environmental damage in the supply chain.
This means managing the risk that
scrapping the metals could shorten the distance a vehicle can travel between
charges. Without a solution to that, the range anxiety that has long hampered
the industry would increase, so access to the metals may become a competitive
edge.
Rare earth magnets, mostly made of
neodymium, are widely seen as the most efficient way to power electric vehicles
(EVs). China controls 90% of its supply.
Prices of neodymium oxide more than
doubled during a nine-month rally last year and are still up 90%; the U.S. Department
of Commerce said in June it is considering an investigation into the national
security impact of neodymium magnet imports.
Companies trying to cut their use include
Japan’s third-largest carmaker Nissan Motor Co, which told Reuters it is
scrapping rare earths from the engine of its new Ariya model.
Germany’s BMW AG did the same for its iX3
electric SUV this year, and the world’s two biggest automakers Toyota Motor
Corp of Japan and Volkswagen AG of Germany have told Reuters they are also
cutting back on the minerals.
Rare earths are critical for the
electronics, defence and renewable energy industries. Because some can generate
a constant magnetic force, the magnets they make are known as permanent
magnets.
Electric cars with these require less battery
power than those with ordinary magnets, so vehicles can go longer distances
before recharging. They were the no-brainer choice for EV motors until about
2010 when China threatened to cut rare earth supply during a dispute with
Japan. Prices boomed.
Now, supply concerns are opening a divide
between Chinese EV producers and their Western rivals.
While automakers in the West are cutting
down, the Chinese are still churning out vehicles using the permanent magnets.
A Chinese rare earths industry official told Reuters that if geopolitical risks
are set aside, China’s capacity can “fully meet the needs of the world’s
automotive industry.”
WESTERN COUNTRIES LARGELY WITHDREW FROM
PRODUCING RARE EARTH METALS, WHICH INVOLVES COMPLEX PROCESSING AND OFTEN
NOXIOUS BYPRODUCTS
Altogether, based on sales data from JATO
Dynamics, manufacturers accounting for 46% of total light vehicle sales in 2020
have said they have scrapped, plan to eliminate, or are scaling down rare
earths in electric vehicles.
And new ventures are springing up to
develop electric motors without the metals, or to boost recycling of the
magnets used in existing vehicles.
“Companies that spend tens or hundreds of
millions developing a family of products… they don’t want to put all their eggs
in one basket – that’s the Chinese basket,” said Murray Edington, who runs the
Electrified Powertrain department at British consultancy Drive System Design.
“They want to develop alternatives.”
BMW says it has redesigned its EV
technology to make up for a lack of rare earths; Renault SA has slotted its
rare-earth-free Zoe model into a growing niche of small urban cars that do not
need extended driving ranges.
Tesla Inc, the US EV giant whose $621
billion market value is just below that of the top five automakers combined –
is opting for both types of motors.
“You’re pulling your hair deciding
whether you think supplies will be viable in the future and at what price,”
said Ryan Castilloux of Canada-based consultancy Adamas Intelligence.
His consultancy expects global consumption
of rare earths for magnets to climb to $15.7 billion by 2030, nearly four times
this year’s value.
EVs and wind turbines
Neodymium is a mighty metal. The
neodymium magnets in a typical EV weigh up to 3kg (6 lb), but even at 1/12th of
that weight, a neodymium magnet can support steel as heavy as prizefighter
Tyson Fury, and will have about 18 times more magnetic energy than the standard
variety, British magnet company Bunting told Reuters.
Even though the pandemic has dented auto
sales, demand for these magnets in electric vehicles shot up by 35% last year
alone to 6,600 tonnes, Adamas Intelligence says.
The permanent magnets in hybrid and EV
motors cost more than $300 per vehicle or up to half the cost of the motor,
analysts say.
Analysts at investment bank UBS expect
electric models to make up half of global new car sales by 2030, up from only
4% last year. The magnets are also in demand for wind turbines, global
installations of which jumped 53% last year, according to the industry trade
group.
DEMAND FOR NEODYMIUM MAGNETS IN ELECTRIC
VEHICLES SHOT UP BY 35% LAST YEAR ALONE
Over the past two decades, Western
countries largely withdrew from producing rare earth metals, which involves
complex processing and often noxious byproducts. Today, China’s dominance runs
through the entire production chain.
“The upstream rare earth supply chain,
including mining and processing, is definitely a big concern, but when it comes
to actual RE magnet production, China has an even tighter grip,” said David
Merriman at Roskill, a critical materials consultancy in London.
Not enough
For many EV drivers, range anxiety may
not be an issue.
“Most people are driving less than 100
miles a day, so for that you can have a less efficient motor,” said researcher
Jürgen Gassmann at Fraunhofer IWKS in Germany.
Even so, automakers in the West have
adopted a range of strategies. Some, like Toyota, still use permanent magnets
but have trimmed use of rare earths, developing a magnet that needs 20%-50%
less neodymium.
Others, like BMW, have undertaken major
redesigns: The German carmaker told Reuters it overhauled its drive unit to
combine motor, electronics and transmission in a single housing, cutting down
on space and weight.
“Our goal for the future is to avoid rare
earths as much as possible and to become independent of possible cost,
availability and – of course – sustainability risks,” said Patrick Hudde, BMW’s
vice president of raw material management.
Tesla started in 2019 to combine engine
types. Its S and X models have two motors: one with rare earth magnets, one
without. The induction motor provides more power, while the one with permanent
magnets is more efficient, Tesla said: Including a rare earth motor boosted the
models’ driving range by 10%. Volkswagen also uses both types of motors on its
new ID.4 crossover SUV, it said.
The use of non-rare-earth electric motors
is set to jump nearly eightfold by 2030, according to Claudio Vittori, senior
analyst of e-mobility at data analytics company IHS Markit. But he said
permanent magnet motors will still dominate, mainly because of their power and
efficiency.
If the forecasts are correct, it’s not
certain that even these tweaks can cool the market.
“I think we need these innovations to
help balance the really strong demand growth that we’re looking at,” Castilloux
says. “There’s almost no scenario where supply will be enough.”
reuters