Which EV Car maker will buy into ASN in the near future to secure Lithium supply in North America?
Carmakers buy into lithium miners in drive to survive"Global carmakers including Volkswagen and Mercedes-Benz are increasingly taking matters into their own hands to secure supplies of lithium and battery minerals, buying equity stakes in lithium companies and mines, and even building their own battery manufacturing plants.They are desperate to become less reliant on outsiders in a major industry shift where electric vehicle production is accelerating fast."
"Volkswagen – which owns an array of car brands including Audi, Skoda, Bentley and Lamborghini as well as the core VW brand – last year set up a separate company called PowerCo, which is building battery factories to supply its own EVs and to sell those batteries to outside customers.Last month it went a step further and signalled that
PowerCo would take direct stakes in the sort of lithium and nickel mines that are flourishing around the world.It comes after VW was embroiled in a global emissions scandal in 2015 over diesel exhaust emissions which made its vehicles look more environmentally friendly than they were. In Australia, VW was hit with a $125 million fine over that issue."
Volkswagen’s dedicated unit is the latest example of a trend that has been running hard over the six years since the Chinese automaker Great Wall surprised the Australian investment community by taking a 3.5 per cent stake in ASX-listed lithium exporter Pilbara Minerals.
Automakers know that without lithium, nickel, cobalt, manganese and copper they will struggle to deliver on their promises for a wholesale switch to making electric vehicles.The CEO of $11 billion lithium group Pilbara Minerals, Dale Henderson, said carmakers were among a “diverse group” of suitors trying to lock down lithium supply.“You’ve got that category of OEMs (original equipment manufacturers) who are scrambling, trying to shore up their supply chain. They definitely exist, but then throughout the supply chain you have got different groups wanting to secure supply,” he said.
Carmakers who have been manufacturing traditional internal combustion engines for decades are also diversifying fast. “You have got the existing participants in the industry wanting to expand,” he said.Australia is already the largest exporter of lithium in the world and lithium is projected to be a big export earner for the nation over the next few years.The Federal Department of Industry, Science and Resources forecast in a report on April 3 that the value of lithium exports would rise from $5 billion in 2021-22 to $19 billion in 2022-23.
Car manufacturers across the globe are moving at pace so they aren’t left behind in the global scramble to ensure they have enough supply. Equity stakes are becoming more common, a step further than just having supply contracts.Chinese electric vehicle giant BYD, backed by billionaire investor Warren Buffett’s Berkshire Hathaway, in early December bought a 5.1 per cent stake in China’s third-largest lithium supplier, Chengxin Lithium. BYD is a bigger player in electric vehicles than industry pioneer Tesla.
Offtake agreementsAustralian-based lithium groups and battery metal miners are being courted regularly.Tesla has a deal to buy nickel from BHP.Ford has an offtake and lending arrangement with Liontown Resources – the company currently in the spotlight as it fends off a takeover bid from the world’s largest publicly traded lithium producer, Albemarle.The carmakers are pushing hard to become more vertically integrated, wary of being caught short in the rush to secure lithium supplies.
German giant VW announced three weeks ago plans for its first battery plant outside Europe, to be located in Ontario in Canada. VW intends selling batteries to outside customers too.Both VW and Stellantis, an industry behemoth that owns brands including Alfa Romeo, Fiat, Jeep, Maserati, Dodge, Chrysler and Citroen, have agreements with the German-Australian lithium group Vulcan.
Investing in minesPart of the strategy involves making direct investments in mines to bring down the cost of batteries for electric vehicles.PowerCo has three EV battery-making plants on the drawing board for Europe – in Germany, Sweden and Spain. It has set a goal of eventually supplying half of its own requirements for lithium and other minerals.Thomas Schmall, Volkswagen AG’s board member for technology, said the decision to set up a battery factory in Canada showed how serious the group is on becoming a global player in battery making.“Our gigafactory in Canada sends a strong message. PowerCo is on track to become a global battery player,” he said on March 14.
Mercedes-Benz is also moving fast. Chief executive Ola Kaellenius said on March 30 at its annual ESG conference and briefing that the car group had made the fundamental decision that if a “deep sourcing” opportunity appeared – right down to a lithium mine – then it was ready to divert capital to it.Mercedes-Benz in October last year signed a supply agreement with Rock Tech Lithium to receive on average 10,000 tonnes of battery-grade lithium hydroxide per year from 2026.The deal is part of push to accelerate production of fully electric vehicles. It has also made a commitment that by 2039 all of its steel for the vehicles will come from “green steel” producers, who aren’t using coal-based processes in steelmaking.
Stellantis in mid-2022 signed an agreement with Controlled Thermal Resources for the supply of lithium hydroxide for its US electric vehicle manufacturing operations.
Ford signed an off-take agreement with ASX-listed Lake Resources in 2022. European Lithium – an Australian company – has signed an agreement with BMW to supply lithium hydroxide from the Wolfsberg Lithium Project in Austria.
Macquarie said in a note on March 22 that it expected the global lithium market to remain in deficit when it comes to supply and demand, and the
deficit in supply could reach around 100kt in 2025.The Federal Department of Industry and Resources report pointed out that governments around the world are taking action to “shore up lithium supplies and other critical mineral supply chains for strategic purposes”.In November 2022, the Canadian government ordered three Chinese companies to divest their investments in Canadian critical minerals, citing national security.US President Joe Biden’s Inflation Reduction Act of 2022 contained several provisions to strengthen critical mineral supply chains for the US.
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