EV Sector to Consume Nearly 80% of Chilean Lithium Supplies

As electric vehicles have become more mainstream, plenty of governments have laid out plans to phase out combustion-engine vehicles in exchange for EVs over the next decade. Since EVs mainly run on rechargeable lithium-ion batteries, they produce zero emissions and have the potential to reduce our reliance on carbon-based energy by a great degree. As a result, says Chilean Mining agency Cochilco, the electric car industry will dominate demand for lithium over the next ten years.

On Wednesday, the mining agency said that electric vehicles will account for more than 79% or three-quarters of lithium by 2030, up from a third in 2019. The coronavirus and the resultant economic crisis has reduced the demand for lithium for electric vehicles to around 75,000 tons. However, Cochilco expects it to surge to 1.4 million tons by 2050 based on forecasts for the growing production of hybrid, and fully electric vehicles that use lithium-ion batteries. On the other hand, demand for lithium for other products that use the mineral, such as cell phones, would reach 377,000 tons in 2030 compared to the 242,000 tons of lithium expected for this year.

Due to global trade tensions, the scaling back of electric vehicle subsidies in China, and a wave of new production, lithium prices have been steadily declining for the past few years. According to Cochilco, EV sales have grown this year in Europe, with the first quarter of the year making up 6.8% of car sales compared with just 2.5% from last year. Despite the effect the coronavirus pandemic has had on the EV industry, Cochilco terms COVID as a short term risk to growth. The firm points to the increase in Chinese demand as an example, with the sale of new electric cars growing in July, the first time this year there was a rise in sales.

The Chilean firm foresaw a rise in demand over supply that would steady prices by 2025-2026. It also predicted that Australia and Chile would maintain their slim leads in the production with competition from the U.S. and Argentina reducing Australia’s global supply from 47% today to 31% by 2030 and Chile’s from 29% to 17%.

As more automakers look towards electrification, the demand for lithium is sure to grow. German automaker Daimler partnered with Chinese battery cell producer Farasis Energy earlier this year and BMW signed a long term deal with Swedish battery maker Northvolt. Tesla, currently the world’s largest electric automaker, recently announced it will build a 30GHh factory in Texas.

It would be interesting to hear the perspective of ElectraMeccanica Vehicles Corp. Ltd. (NASDAQ: SOLO) on the future availability of sufficient amounts of lithium to meet the growing demand.

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