EV Sales Are Up, But So Are Lithium Prices
With electric vehicle sales on the rise and the Biden administration allocating $900 million to address the insufficient charging infrastructure – one of the biggest obstacles EVs have to contend with – it seems like alternative energy automobiles may indeed become the future of driving. However, there is one problem even a firehose of money and mounting regulatory pressure can’t address.
Despite massive investments from both government and private entities, EVs need batteries, and the raw materials required aren’t getting any easier to obtain. Lithium values continue to rise and have recently reached an all-time high that’s setting the stage for pricier electric vehicles. While this wouldn’t be so bad by itself, EV prices jumped dramatically this year and have continued to do so at a pace that has overshadowed their combustion-reliant counterparts.
None of the materials necessary for battery production have gotten any cheaper of late. But lithium prices have effectively tripled over the last twelve months, making it the material everyone seems the most worried about. According to Bloomberg, lithium carbonate reached a record 500,500 yuan ($71,315 USD) per ton in China on Friday.
There are a few reasons for this, starting with demand. Mobile devices (phones, laptops, tablets, etc) are now commonplace around the globe and require a lot of the same materials for their batteries. Meanwhile, various governments have drafted stringent regulatory requirements that pressure the industry to build more EVs and effectively force their citizens into driving them. The China Passenger Car Association has raised its own forecast for annual sales of EVs to a record 6 million this year – double the national total in 2021 – with Bloomberg estimating that general China's battery usage will likely double.
At the same time, the European Union has a plan to criminalize the sale of new internal combustion engines by 2035. In the United States, we’ve seen California embracing similar regulatory efforts as the Biden administration sets aside billions to spur EV adoption and beef up the necessary charging infrastructure on a national level.
Issue number two revolves around an inability to meet that rising demand. China, which is the world’s third-largest producer of lithium and the first-largest battery exporter, is presently enduring severe supply chain disruptions. Much of this has been attributed to its aggressive “Zero-COVID” policy and sustained lockdowns. But the country has also been having trouble meeting its own energy needs, which has also created some downtime.
This has everyone worried because China owns at least 70 percent of the entire supply chain for electric vehicles and lithium-ion batteries.
“EV production and sales have held steady in recent months,” wrote Rystad Energy, a research firm, which added there are concerns over the possibility of China’s power crisis returning over the winter. “This could lead to new power shortages and hit lithium operations.”
The World Economic Forum (WEF) – a group that’s pushing automotive electrification harder than most – likewise signaled that there might not be enough lithium to go around earlier this year. Citing the International Energy Agency (IEA) and Credit Suisse, the WEF suggested that supplies would be severely constrained until at least 2025. But it also claimed that around 2 billion EVs need to be on the road by 2050 for the world to ensure net-zero carbon emissions. While this seems to ignore other sources of pollution and negates the fact that battery production is still pretty rough on the planet, it serves as another red flag that there's trouble ahead. As a possible solution, the WEF has suggested eliminating private-vehicle ownership and shifting to a shared economy in the coming years.
But the European climate campaign group Transport and Environment (T&E) says there’s probably only enough lithium to produce up to 14 million EVs in 2023. Considering we managed over 6.2 million units last year, there are concerns that explosive electric-vehicle growth could become unsustainable in the coming years. Though there may not even be enough supply to keep pace even if everything goes according to plan.
This is further complicated by the fact that a majority of the world’s Lithium supply is locked into specific regions. Australia, Chile, China, and Argentina produce more lithium than the rest of the world combined. However, its extraction requires extremely high volumes of water and production has the potential to be further destabilized if any of the aforementioned nations are subjected to a period of sustained drought (like China is currently facing) or uncontrolled pollution. There have already been complaints that Chile’s mining efforts have done irreversible damage to nearby ecosystems and tainted water sources used by indigenous people. Meanwhile, environmental groups have started protesting lithium mining in places like Serbia – encouraging the government to scrub plans to open new lithium mines.
Ultimately, governments and the automotive industry seem to have placed the cart before the horse in terms of sustainable batteries and are now running into a litany of serious problems. For consumers, the best-case scenario will be elevated pricing on EVs (and just about everything else that requires a battery) until output can be improved or a new type of battery is invented. As for the worst case, imagine a marketplace where new combustion cars are no longer available, electrics are in short supply, and energy rationing continues because the matter was not properly addressed in the first place.
The only silver lining available here is the fact that just about everyone wants to get in on the action. Lithium mining stocks have been on the rise in recent years, so there's no shortage of investors. S&P Global has estimated the demand for the material will increase by 2,200 percent between 2020 and 2030. So new mines are being planned every day, though they are running into obstructions from local residents who aren't thrilled by the idea of living near one.
[Image: Jason Benz Benne/Shutterstock]
Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by subscribing to our newsletter.
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
More by Matt Posky
Comments
Join the conversation
It is interesting how the Green Energy idiots in Europe lurch from one self-induced crisis (dependence on now non-existant Russian gas) to another (mandating cars for which there is an insufficient amount of materials to make them).
Why others want to follow their lead makes no sense without something more sinister plan behind it. Either way, a tinfoil hat doesn't seem as dumb as first blush would otherwise indicated.
If that we true, I'ld agree. In the US, under Trump and Biden...
Who was forced to take a vaccine?
Who in the US was forced to stay inside their home?
I don't know what part of the US you live in, but in the 2nd most liberal state of the union where I was, these things did not happen. Nor in the most liberal city of one of the most liberal countries in the world, where I lived for part of the pandemic. Even the red light district in here in Amsterdam stayed open during covid, no one was required to stay home, and you could visit without a vaccine and without a mask. Or buy a joint or get vaccinated, or not. Not in China perhaps, but in the free world, the governments overwhelmingly try to protect their citizens from harm.
Thus in the US, masks requirements were for public safety, to minimize the risk of you or me killing other people by of breathing a deadly virus on them. Wanting the freedom to breath death onto people is crazy. And masks did and do work, which is why surgeons wear them. But next time you need surgery, you are free to request that he surgeon not wear a mask and free not to take antibiotics when you get infected.
We accept all sorts of limitation on private rights for public benefit. My personal pet peeve is traffic lights, which have multiplied in the US like cancer. But others such as speed limits, catalytic converters, drivers licenses, license plates, seat belts, no weapons on planes, no public pooping, limits of drinking when driving, mandatory education, taxes, jury duty, shoveling snow your sidewalk... the list is extensive, beneficial, and accepted frequently.
If you want to get into the nitty gritty, the vaccines worked very well. Admission reports from hospitals show 90% of patients were unvaccinated. Reducing your probability of ending up in an emergency ward with a deadly virus by 9x qualifies as working.
But hey, for all the people afraid of modern medicine and vaccines, enjoy polio. And chick pox, cow pox and and all manner of preventable diseases. Those of us who understand science will be protected, and unfortunately watch the crazy talkers die.