From China’s Mongolian graphite mines to the Democratic Republic of the Congo’s cobalt deposits and the lithium reserves of Chile’s Atacama Desert, the race is on to find and extract more rare minerals to feed the growing global appetite for electric batteries.
Sound familiar? What we’re seeing today mirrors the century-long quest to pull more and more oil from the ground to feed the world’s longstanding reliance on vehicles powered by internal combustion engines (ICE). This approach yields predictable outcomes: we face a bottleneck in the electric battery value chain that promises to worsen unless we take immediate steps to shift away from the unsustainable take-make-waste and extract-burn-emit cycles of the ICE era, which have exacted an incalculable cost in terms of environmental degradation, material scarcity, geopolitical upheaval, and economic instability.
Fortunately, we’re in a strong position to break these cycles by choosing a different and decidedly more sustainable course for electric batteries. Instead of letting history repeat itself by chasing and consuming more raw materials, we can alleviate the battery bottleneck by prioritising closed-loop, circular processes that maximise the value and lifespan of not just batteries but the components and materials within them.
The means to break the battery bottleneck are already at hand. More sustainable practices, supported and augmented by a new generation of technological capabilities, along with a measure of good old-fashioned collaboration, can enable the electric vehicle (EV) value chain to keep pace with a global battery market that is projected to grow 30% annually from 2022 to 2030, according to McKinsey.
A 2024 analysis by the Carnegie Endowment for International Peace points out that China controls much of the value chain for current generation lithium-ion batteries. It accounts for an estimated 70-90% of key markets like mineral extraction, cell production, and battery manufacturing. “China dominates the manufacturing of every component of battery cells as well as the upstream supply chain…Chinese firms not only refine most of the world’s battery minerals at home but also have extensive interests in mines abroad.”
The battery market’s heavy dependence on Chinese-sourced materials can be a destabilising force, as evidenced by the struggles of companies like Sweden-based battery component manufacturer Northvolt. The company filed for bankruptcy in March 2025, citing “compounding challenges” like geopolitical instability and supply chain disruptions as factors that led to the filing. Northvolt’s bankruptcy, at least temporarily, removes another potential non-Chinese cell manufacturer that could have helped break the battery bottleneck.
The challenge, then, is to engineer a shift that lessens reliance on China and enables the various stakeholders that comprise the electric battery value chain to scale production sustainably, ethically, compliantly, and profitably. Doing so will require a broad rethinking of how battery materials are sourced, utilised, and reused. There are four keys to meeting that challenge.
Commit to circular products and business models
Automakers are diversifying into the battery business with ventures like Volkswagen Group’s battery cell production company, PowerCo. With plans to begin manufacturing operations in 2025 in Germany, and later in Canada and Spain, the company intends to develop business models around the reuse of discarded car batteries and the recycling of raw battery materials. These kinds of circular business models represent the future of the battery value chain, where materials and products are repurposed, reused or recycled, such as by refurbishing end-of-life units for use in stationary sources. Beside pursuing circular business models that keep materials in use, PowerCo has also moved to diversify its supply options by striking a deal in December 2024 with Canada’s Patriot Battery Metals to source lithium from North America. To manage an increasingly diverse supply chain, its business processes and both existing and new business models, PowerCo is relying on a centralised, cloud-based system as the foundation for its IT infrastructure.
With a centralised system as a foundation to help them manage reuse, recycling and material recovery, OEMs can begin to explore other intriguing business models that support the circularity of electric vehicles. They could, for example, investigate models in which consumers rent, lease or subscribe to vehicles, enabling manufacturers to retain ownership of the vehicle and its components. They would then directly control reuse and recycling of batteries and other components.
Step up efforts to develop the next-generation battery
Although lithium-ion batteries have played an important role in the maturation of electric vehicles, their performance limitations, along with the sourcing risks associated with the raw materials they require, are driving development of other highly promising battery technologies.
Not only could emerging options like solid-state batteries and lithium-iron-phosphate batteries offer significant upgrades in energy density, recharging time, range and safety, they can be designed to use less of the raw materials causing the battery bottleneck. For example, some solid-state batteries in development lack graphite anodes, a cell component sourced almost entirely in China. Besides performance improvements, Toyota notes that solid-state batteries require fewer rare materials, can stay in service longer, and are simpler to recycle. This is another area in which digital capabilities have a vital role to play, helping automakers and others in the battery value chain design and develop profitable reuse and recycling pathways and processes to maximise resource efficiency and minimise waste.
Bring the ‘digital battery passport’ concept to life
Beginning in 2027, all high-voltage electric car batteries sold in the EU must carry a ‘battery passport’. This is a comprehensive and up-to-date record with more than 100 data points detailing physical attributes, specifications, composition, current condition, carbon footprint, dismantling and recycling/repurposing instructions, pertinent regulatory requirements, and more. Need to know where a battery’s cobalt was sourced, the plant where its cells were produced, the carbon footprint associated with it, its recycled content, and how much life it has left? The digital passport is the single source of truth for that information—one that consumers can use to evaluate and compare products, regulators can use to assess compliance, and members of the circular value chain can use to determine next steps for a battery.
Making the digital passport concept a reality requires track-and-trace tools capable of collecting, standardising, and disclosing data associated with each and every step in a battery’s journey. That includes internal information and data from multiple parties across the supply chain.
Increase collaboration
Automotive and battery companies have already realised that breaking the linear take-make-waste battery cycle and replacing it with a more sustainable, circular approach won’t happen in a vacuum. Instead, it’s going to take extensive information sharing and co-innovation across companies and industries. Automakers, cell manufacturers, battery producers, raw material suppliers, and recycling companies will need to connect their digital systems to share information, work from common digital environments, jointly develop standard practices and parameters to govern their collaborative efforts, and pursue multi-stakeholder business models. They’ll also need the means to share carbon footprint and other sustainability-related information.
These types of collaborative, cross-industry frameworks—business networks, ecosystems, and consortia—are already emerging around electric vehicle batteries. Active initiatives include the Global Battery Alliance, Battery Pass, and Catena-X.
With collaboration catalysts like these in place, along with a new generation of digital tools and a collective will to end the battery bottleneck, we already have the makings of a more sustainable and decarbonised transportation future. Now it’s time for companies to individually and collectively take steps to make that future a reality.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Written by Sebastian Scharfenberger, Global Battery Practice Lead, SAP
The AutomotiveWorld.com Comment column is open to automotive industry decision makers and influencers. If you would like to contribute a Comment article, please contact editorial@automotiveworld.com
