As demand for battery electric vehicles (BEVs) surges toward the end of the decade, a new report from McKinsey warns that shortages in essential raw materials could jeopardize the transition to cleaner energy.
According to McKinsey, global demand for BEVs is poised to grow sixfold between 2021 and 2030, with annual passenger car sales rising from 4.5 million units to approximately 28 million by the end of the decade. This rapid expansion, while promising for emissions reductions, highlights looming supply chain challenges that could disrupt production and inflate costs.
Critical Materials Under Pressure 
The EV industry relies on a handful of critical raw materials, including lithium, nickel, cobalt, and manganese, to power its batteries. McKinsey’s analysis suggests that by 2030, demand for several of these materials will outstrip current supply projections, even as new mining and refining operations come online.
Lithium, a cornerstone of modern battery technology, is expected to face particularly acute shortages. Today, the battery sector consumes over 80% of all lithium produced globally—a figure that could climb to 95% by 2030. With demand soaring, the report notes that lithium production must expand significantly to avoid bottlenecks.
Nickel, essential for high-performance batteries, has already seen a surge in investment, particularly in Southeast Asia. Despite this, McKinsey forecasts a potential shortfall of Class 1 nickel (the high-purity grade required for batteries) by 2030, as EV makers compete with the steel industry for limited supplies.
Cobalt, while playing a reduced role in newer battery chemistries, remains critical for stability and performance. McKinsey projects that cobalt demand could rise by 7.5% annually through 2030. While shortages are less likely, cobalt’s supply will largely depend on nickel and copper production, as it is primarily a byproduct of those metals.
Manganese, though plentiful in raw form, presents a different challenge. Battery-grade manganese—used to produce high-purity manganese sulfate monohydrate (HPMSM)—requires specialized refining capacity. McKinsey notes that current output is insufficient to meet growing demand, with only 20–30% of projected HPMSM supply meeting battery-quality standards by 2030.
Supply Chains Under Strain
Adding to these supply pressures is the geographic concentration of critical minerals and refining operations. Lithium reserves are heavily clustered in Argentina, Bolivia, and Chile, while nickel is largely sourced from Indonesia. The Democratic Republic of Congo dominates cobalt production, accounting for roughly 70% of the global supply.
Yet mining is only part of the story. Refining and processing—essential steps in turning raw ore into battery-ready materials—are even more centralized. China, for instance, refines the majority of the world’s lithium, cobalt, and graphite. This dominance raises concerns for regions like Europe and the United States, which depend heavily on imports to fuel their clean energy ambitions.
The European Union, for example, sources 68% of its cobalt from the DRC, 24% of its nickel from Canada, and nearly 80% of its refined lithium from Chile. Such reliance on a handful of nations leaves buyers vulnerable to geopolitical disruptions and trade restrictions.
The Price of Limited Transparency
Beyond supply shortages, the lack of transparency in the sourcing of raw materials poses broader risks. For example, over 95% of high-purity manganese comes from China, with smaller contributions from Belgium and Japan. Similarly, nearly all graphite used in battery anodes is refined in China, which holds a near-monopoly on anode production.
This opacity complicates efforts to address environmental, social, and governance (ESG) concerns, particularly in regions like the EU, where strict regulations now govern the sustainability of battery materials. The EU’s Batteries Regulation, for instance, mandates oversight from raw material extraction to recycling, increasing pressure on companies to trace and verify their supply chains.
McKinsey also notes that recent trade policies are amplifying these risks. Indonesia’s ban on nickel ore exports and China’s new restrictions on graphite exports are forcing manufacturers to rethink sourcing strategies and consider alternative suppliers. Meanwhile, supply chain disruptions during the pandemic years—spanning materials like magnesium, silicon, and semiconductors—have highlighted the fragility of current systems.
The Path Forward
As the EV sector hurtles toward unprecedented growth, the race to secure critical battery materials is intensifying. To meet soaring demand, the industry will require significant investment not only in mining but also in refining capacity and recycling infrastructure.
Governments and manufacturers alike must also diversify supply chains to reduce dependence on single-country sources. For example, the United States’ Inflation Reduction Act has incentivized domestic production of battery components, while the European Union is exploring partnerships with resource-rich nations to bolster supply.
