After decades of slow growth, electric vehicles (EVs) are finally starting to take over mainstream markets. Most major automakers now offer electric or hybrid models, and it seems increasingly likely that such products will become the norm as their underlying technology advances. However, the innovations enabling this disruption are only possible through an often hidden supply chain that demands attention.

EV technology does not exist in a vacuum. It is the product of several smaller components and materials flowing from a complex and cloudy network of sources, suppliers, and logistics providers. Businesses must focus their efforts on uncovering and modernizing these supply chains if they hope to sustain EVs’ current growth trajectory.

Critical Mineral Sourcing Complexity

Critical minerals like lithium and cobalt are the most crucial and controversial aspects of the EV supply chain. The countries of origin that an automaker publicizes often do not tell the whole story. Even an “American-made” EV still relies on international sources for the minerals necessary to make its batteries.

For example, 74% of the world’s cobalt comes from the Democratic Republic of Congo. Australia and and Chile are responsible for much of the global lithium supply. Most notably in today’s macroeconomic environment, China is another major source of lithium and a global leader in refining multiple critical minerals, meaning many EV materials pass through the nation at some point.

This reliance on just a few concentrated sources is risky, as it means disruptions in one area can ripple throughout the EV industry. Tariffs and other trade barriers also raise concerns when so much of the sector relies on nations like China.

Further complicating the issue is the fact that many automakers may not even understand where they fall in these complicated networks. Only 13% of global businesses have full visibility into their supply chains, with at least 16% not even knowing half of their suppliers.

Environmental Supply Chain Concerns

These long, complex supply chains also make many EVs not quite as sustainable as they seem. Mining these critical minerals is an environmentally destructive process, and China — which manufactures 77% of lithium-ion batteries — uses coal as its primary energy source. While these emissions are still lower than what a gas-powered car produces over its life, they’re worth considering.

All the travel involved in shipping materials and parts introduces additional emissions. Many companies may re-route EV parts through new countries for additional processing so they can say they came from one area when their origins are technically somewhere else. This strategy may reduce some tariff-related concerns but means more transportation, increasing supply chain emissions.

How Can EV Supply Chains Evolve?

Thankfully, change is possible for EV supply chains. It starts with product redesigns to help automakers reduce their reliance on some material or component suppliers.

Novel foam insulation can limit moisture transfer and heat dissipation, which improves battery performance and life spans. When EV batteries do not degrade as quickly, replacements are less crucial, leading to a drop in demand for lithium and cobalt. Alternatively, using different battery makeups that use fewer of these materials to begin with could yield supply chain improvements.

Increasing visibility through technologies like Internet of Things tracking and cloud dashboards can also help. Organizations implementing such changes are twice as likely to experience no challenges from supply chain disruptions, as they can see and respond to challenges earlier. More transparency will also help automakers learn more about their sourcing, informing strategic shifts like supplier diversification to minimize shipping lengths or avoid risky single dependencies.

Battery recycling is another area to pursue. Up to 95% of battery minerals are recyclable once a cell reaches the end of its life, but this practice is relatively rare because it’s challenging and expensive. Increased research and development could lower those barriers, giving manufacturers another, more eco-friendly supply of critical materials.

EV Innovation Starts in the Supply Chain

EVs could transform the transportation industry, but several advancements are necessary before they reach that point. Those innovations will only be achievable or practical if brands address the hidden supply chains behind this technology. Once EV supply chains are more visible, diverse and sustainable, electric cars can reach their full potential.