China’s friction drives electric carmakers away from rare earth magnets

LONDON, July 19 (Reuters) – As tensions rise between China and the United States, Western automakers try to reduce their reliance on a key driver of the electric vehicle revolution – permanent magnets , sometimes smaller than a pack of cards, which power electric motors.

Most are made from rare earth metals from China.

The metals in magnets are actually plentiful, but can be dirty and difficult to produce. China has grown to dominate production, and with the growing demand for magnets for all forms of renewable energy, analysts say a real shortage could occur.

Some auto companies have been looking to replace rare earths for years. Today, manufacturers accounting for nearly half of global sales say they are limiting their use, according to a Reuters analysis.

Western automakers say they are concerned not only with securing supply, but also huge price swings and environmental damage in the supply chain.

This means managing the risk that metal scrapping can reduce the distance a vehicle can travel between loads. Without a solution to this, the range anxiety that has long hampered the industry would increase, so access to metals could become a competitive advantage.

Rare earth magnets, primarily neodymium, are widely regarded as the most efficient way to power electric vehicles (EVs). China controls 90% of their supply.

Neodymium oxide prices more than doubled in a nine month rally last year and are still up 90%; the US Department of Commerce said in June that it was considering an investigation into the national security impact of imports of neodymium magnets.

Among the companies trying to reduce their usage include Japan’s third-largest automaker Nissan Motor Co (7201.T), which told Reuters it is removing rare earths from the engine of its new Ariya model.

Germany’s BMW AG (BMWG.DE) has done the same for its iX3 electric SUV this year, and the world’s two largest automakers Toyota Motor Corp (7203.T) of Japan and Volkswagen AG (VOWG_p.DE) of Germany told Reuters they were also cutting back on minerals. (For a Factbox, see more information)

Rare earths are essential for the electronics, defense and renewable energy industries. Because some can generate a constant magnetic force, the magnets they make are called permanent magnets.

Electric cars with these require less battery power than those with regular magnets, so vehicles can travel longer distances before recharging. They were the obvious choice for EV engines until around 2010, when China threatened to cut supplies of rare earths during a dispute with Japan. The prices have exploded.

Now, supply issues are opening a wedge between Chinese electric vehicle producers and their Western rivals.

As Western automakers cut spending, the Chinese continue to produce vehicles using permanent magnets. A Chinese rare earth industry official told Reuters that if geopolitical risks were ruled out, China’s capacity could “fully meet the needs of the global auto industry.”

In total, based on sales data from JATO Dynamics, manufacturers accounting for 46% of total light-duty vehicle sales in 2020 said they scrapped, plan to phase out or reduce rare earths in electric vehicles. .

And new companies are emerging to develop metal-free electric motors, or to stimulate the recycling of magnets used in existing vehicles read more.

“Companies that spend tens or hundreds of millions of dollars to develop a family of products … they don’t want to put all of their eggs in one basket – it’s the Chinese basket,” said Murray Edington, who heads the Electrified Powertrain department of the UK consultancy firm. Design of the drive system. “They want to develop alternatives.”

BMW says it has redesigned its EV technology to overcome the lack of rare earths; Renault SA (RENA.PA) has inserted its rare earth-free Zoe model into a growing niche of small urban cars that do not need extended range.

Tesla Inc (TSLA.O), the U.S. electric vehicle giant whose market value of $ 621 billion is just below that of the five major automakers combined, is opting for both types of engines.

“You are tearing your hair out to decide whether and at what cost you think the supplies will be viable in the future,” said Ryan Castilloux of Canadian consultancy Adamas Intelligence.

His consulting firm expects global consumption of rare earths for magnets to reach $ 15.7 billion by 2030, nearly four times this year’s value.

EVS AND WIND TURBINES

Neodymium is a powerful metal. The neodymium magnets of a typical electric vehicle weigh up to 3 kg (6 lbs), but even at 1/12 that weight, a neodymium magnet can support steel as heavy as the Tyson Fury boxer, and will have about 18 times more magnetic energy than the standard variety, UK magnet company Bunting told Reuters.

Even though the pandemic has dented auto sales, demand for these magnets in electric vehicles increased by 35% last year to reach 6,600 tonnes, according to Adamas Intelligence.

Permanent magnets in hybrid and electric motors cost more than $ 300 per vehicle – up to half the cost of the motor, analysts say.

Analysts at investment bank UBS expect electric models to account for half of global new car sales by 2030, down from just 4% last year. Magnets are also in demand for wind turbines, whose global installations jumped 53% last year, according to the industry trade group.

Over the past two decades, Western countries have largely withdrawn from the production of rare earth metals, which involves complex processing and often harmful by-products. Today, China’s dominance extends across the entire production chain.

“The upstream rare earth supply chain, including mining and processing, is certainly a big concern, but when it comes to the actual production of RE magnets, China has an even tighter grip,” said David Merriman of Roskill, a critical materials consultancy in London.

NOT ENOUGH

For many EV drivers, range anxiety may not be a problem.

“Most people drive less than 100 miles a day, so for that you can have a less efficient engine,” said researcher Jürgen Gassmann from Fraunhofer IWKS in Germany.

Despite this, Western automakers have adopted a series of strategies. Some, like Toyota, still use permanent magnets but have reduced the use of rare earths, developing a magnet that requires 20-50% less neodymium.

Others, like BMW, have undertaken major redesigns: The German automaker told Reuters it had overhauled its drive unit to combine the engine, electronics and transmission in one housing, reducing the space and weight.

“Our goal for the future is to avoid rare earths as much as possible and to become independent of possible risks of cost, availability and – of course – sustainability”, said Patrick Hudde, vice president of management of BMW raw materials.

Tesla began in 2019 to combine types of engines. Its S and X models have two motors: one with rare earth magnets, one without. The induction motor provides more power, while the permanent magnet one is more efficient, Tesla said: The inclusion of a rare earth motor increased the models’ range by 10%. Volkswagen also uses both types of engines on its new ID.4 crossover SUV, he said.

The use of non-rare earth electric motors is expected to increase eightfold by 2030, according to Claudio Vittori, senior e-mobility analyst at data analytics firm IHS Markit. But he said permanent magnet motors will always dominate, mainly because of their power and efficiency.

If the forecast is correct, it is not certain that even these adjustments can cool the market.

“I think we need these innovations to help balance the very strong growth in demand that we envision,” Castilloux said. “There is hardly any scenario where the supply will be sufficient.”

Additional reporting by Eimi Yamamitsu in Tokyo, Jan Schwartz in Hamburg, Christoph Steitz in Frankfurt, Yilei Sun in Beijing and Tom Daly; edited by Veronica Brown and Sara Ledwith

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