Dependence on Lithium A Speed Breaker For EV Transition

Lithium supply chain risks are wrecking plans for the expansion of EVs as well as large storage. Among its other uses in renewable technology, lithium is a key element in electric car batteries.

Electric car sales are at an all-time high, with companies including Tesla, Volkswagen, and Mercedes posting record shipments in the first three months of 2022. But because of the surge in demand, experts are unsure whether enough lithium is available.

Lithium prices have surged a staggering 438% above last year. The increase comes as the amount of the metal used has almost quadrupled over the last decade. But the process for extracting lithium, and a relative lack of investment, have yet to catch up with the rising demand.

Extracting lithium is complicated, involving either mining the ore and then separating the metal or pumping underground water deposits to the surface and then extracting the metal from pools.

The lithium supply crunch has not gone unnoticed by electric car manufacturers. Earlier this month, Tesla CEO Elon Musk tweeted about the issue, commenting on what he described as the “insane levels” of lithium prices.

The supply deficit of these crucial metals may cause more electric companies to raise prices this year, potentially undermining what has so far been a blockbuster year in sales.

As the world moves to meet stringent targets for cutting carbon emissions – partly by phasing out internal-combustion-engine cars – demand for lithium, cobalt and nickel vital for electric vehicle batteries will soar, raising the prospect of shortages.

Electric vehicle batteries can use lithium carbonate or lithium hydroxide, but the industry typically talks of lithium carbonate equivalent (LCE) which contains both.

LCE prices on the spot market have risen above $12,000 a tonne, more than double the levels seen in November last year and the highest since January 2019, Benchmark Mineral Intelligence (BMI) says.

Thus, not only does this put paid to hopes of falling prices for EV’s, it is also bringing back demands to subsidise EV’s further, something fiscally strained economies will struggle to do, thanks to the double whammy of high EV costs as well as fossil fuel prices.