Early adopters of new technology often pay more for the product. This was true for the mobile phone, the Smart TV as well as for Electric vehicles.
Early Tesla buyers already know that the latest Tesla is a better model and it just gets cheaper. After Tesla slashed its prices, early adopters copped a beating on their second hand value. If you were a buyer, you'd want the latest battery technology, range and better pricing.
But as we've seen with the Chinese EV makers able to produce better EV models with ever lower prices, it shows that growth eventually happens with scale and with scale, you get economies. Over time, EVs can be at prices comparable to ICE vehicles and that can only fuel their growth trajectory. But for EVs to scale up, it needs to be cost competitive, and to be cost competitive, its input costs need to be low and since battery cost represent the largest cost component, it needs low battery mineral cost to produce the cheapest battery cells that is needed.
More EVs produced must eventually see more lithium and other battery minerals being produced and the law of economics would see more global suppliers producing lithium to meet demand, hence I reckon that we would see considerable lithium supply coming onstream in the years ahead to ensure that lithium pricing remains reasonable and at sustainable level to continue to spur the growth of the EV industry and its transformation.
Which comes to my point being that over the longer term, we will get EV growth scaling up but only with a supportive battery cell and accordingly lithium pricing. The 2020-23 lithium pricing would likely not be replicated, EV will grow as would lithium production growth but the early lithium producers would eventually face a new lithium landscape in which they no longer monopolise or command in a big way as they do now and the bonanza pricing of a few years back would no longer be revisited. By then, the market can determine what is appropriate for their market valuation in a different supply market as they face today, more crowded and with lower sustainable long term margins. Price valuations accorded to the present producers would likely fetch a lower multiple then.
As we must all remember, a resource company producing a commodity has no moat. And besides, Australian lithium producers have one disadvantage, its considerable distance from the US and EU markets. Once US is able to get its own lithium domestically, EV makers in US would have little incentive to source their supplies from our turf and we could end up having to supply to China and compete with China's source of supply from Africa. Unfortunately, unlike iron ore, lithium is widely available in every continent in the globe.
...something long term lithium stock holders need to consider.
