The market for electric vehicles is booming; however, the shortage of battery-related materials such as lithium, nickel and cobalt could jeopardize the adoption of these vehicles. If this issue persists, factories may close and automakers may face financial penalties for failing to meet emission standards.
The rising EV battery demand is expected to necessitate 50 new lithium projects, 60 nickel mines, and 17 cobalt developments as we approach 2030, according to the International Energy Agency. This poses a serious danger for a mining sector that takes a long period of time (15 years in some cases) to come up with a project. Because of this, car makers have resolved to forego conventional supply networks and head straight to the mines for the needed raw materials.
Mercedes-Benz is among the EV manufacturing companies that have entered into arrangement deals with miners, by signing a purchase product assurance that aids the miners in obtaining financing. “This is a very unique occurrence that seemed unthinkable five years back,” said Ola Källenius.
According to Mercedes-Benz, the capacity to obtain these minerals will determine how long car manufacturers will survive in the sector. As a result, the car makers are traveling all the way down the supply chain to the actual miners in an effort to obtain the minerals at a lower cost while still ensuring that ethical and emissions standards are upheld. Stellantis and GM have already made plans for investment in mines as well.
Many automakers have only recently come to terms with this reality, and they are now engaged in negotiating deals directly with miners. However, this is not a surprise to Chinese EV companies; they have been using this approach for a while by attempting to gain access to lithium miners in Africa and Chile. For example, last month, CATL managed to secure a deal to purchase a nearly 25% share in CMOC for an estimated $3.7 billion.
Tesla has been showing signs of securing deals with miners in the event that the suppliers of critical raw materials fail to do so. But until then, the company is moving forward with the construction of a lithium factory on the Texas Gulf Coast, projected for completion by next year, when the construction materials come in, according to a reliable source conversant with the project.
Lithium seems to have more problems with the soaring prices, which have reached $74,500 per ton of battery-grade material in a span of two years. Its shortages are expected to get much worse by the end of the decade since the lithium sector is still developing and has no expertise to speed up production.
Dealing directly with mineral extraction companies is only one way to sidestep the shortage of needed inputs. Players in the electric vehicle space such as Nikola Corporation (NASDAQ: NKLA) will have to keep looking for innovative solutions to the other challenges they face as they ramp up their plans to address the booming demand for EVs.
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