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Securing the Supply Chain — “If Tesla’s Got Troubles, Everyone Should Worry”

Every December, editors of the English-speaking world’s dictionaries release their choices for Word of the Year, a “word or expression that has attracted a great deal of interest over the last 12 months.”

Unsurprisingly, for 2020, the honorees were coronavirus-related terms, with Merriam-Webster and Dictionary.com bestowing the honor on the word “Pandemic,” whereas the Collins Dictionary Word of the Year was “Lockdown.” 

This year, Dictionary.com ended up choosing the term “Allyship,” while Merriam-Webster went with “Vaccine” as their Word of the Year, but ARPN feels that another term would have been at least equally worthy of being anointed “Word of the Year” this year, and that is the term “Supply Chain.”

After all, the supply chain is what everything hinges on these days — our success in the fight against the coronavirus pandemic, the global push towards net carbon zero, buying a new car, putting presents under the Christmas tree, or just minding our day-to-day business in our personal lives.

In 2020, as the coronavirus brought on a global public health crisis, sent markets into turmoil and brought public life to a screeching halt, we were given a first glimpse into the challenges associated with an over-reliance on foreign, and especially Chinese, raw materials, the effects of which were being felt across broad segments of manufacturing.

Today, the extent of our supply chain vulnerabilities has reached crisis levels.

As Bloomberg writer Anjani Trivedi points out in a recent piece, the fact that even Elon Musk, who has up until now been able to navigate many of the challenges associated with securing supply chains for his company, is “now struggling to procure a raw material only available (in the form it needs) in China, for a battery cell that it’s trying to develop in-house, shows how the compounded effect of tariffs and the supply chain crisis are nowhere near over.”

The raw material in the crosshairs of Musk’s concerns according to Trivedi’s piece is natural graphite — a key component of EV battery anodes.

According to Tesla, which has submitted three comments to the U.S. Trade Representative in support of waivers on essential raw materials it currently needs to import, “natural graphite is currently not available in the specifications nor capacity outside of its current suppliers and China that is required” for the company to manufacture batteries in the United States.

While the logistical delays and related issues “may just seem like hiccups from constraints on moving materials around,” writes Trivedi, “they point to a widening issue.”

He elaborates:

“Consider this: The material Tesla needs – graphite – is also sought by other battery makers. In a comment submitted by South Korea’s SK Innovation Co., the company said ‘there is currently not enough infrastructure in the U.S. that can deliver artificial graphite at the quantity and cost’ it requires — similar to Tesla’s submission. What’s more, the firm noted that, because this material is so key, the higher costs will be passed on to U.S. consumers and American companies. If SK can’t get it, then battery investment — a highlight of the U.S.’s EV and manufacturing policy — could struggle.” 

As the headline of Trivedi’s post suggests, “[i]f Tesla’s Got Troubles, Everyone Should Worry” — and the fact that companies have yet to develop long-term strategies, and policy makers, too have been “slow to address the growing challenges, (…) doesn’t bode well for the world’s manufacturing complex.”

The time to focus on securing supply chains is now.  Thankfully, the United States is home to vast mineral resources and respective development projects that are only waiting to unleash their full potential, including for key battery tech metals like Graphite, Lithium, Cobalt, Nickel and Manganese.

Policy makers must now focus their efforts on creating the framework conducive to harnessing this domestic resource potential, and do more than merely pay lip service to the comprehensive “all-of-the-above” strategy they have embraced on paper.

To date, as we have previously lamented, the overall U.S. government plans appear more geared towards ‘rely[ing] on ally countries to supply the bulk of the metals needed to build electric vehicles and focus[ing] on processing them domestically into battery parts, [as] part of a strategy designed to placate environmentalists.’”

However, while the “friend-shoring” concept is certainly appealing, especially to those policy makers with “not in my backyard (NIMBY)” constituencies, it is insufficient to alleviate our overall supply chain issue. The good news is that we can, in many cases, address the issue domestically, from “soup to nuts,” in  Secretary of Energy Jennifer Granholm’s words. As she told the U.S. Senate earlier this year:

“This is the United States. We can mine in a responsible way. And many places are doing it. And there are some places where there are more challenges, but we can do this.”

And she is right.

We’ll let the dictionary editors lapse in judgment slide — after all the above-referenced ultimate choices for Word of the Year 2021 have their own merits. Ultimately, whether or not the term “supply chain” gets the recognition it deserves, is not important — as long as the issue itself does.