In our July piece, Is This a Turning Point for Lithium Demand?, we discussed our belief that we are in the early stages of a dramatic shift in lithium demand. The main driver: the acceleration of electric vehicle (NYSE:EV) sales. In this piece, we seek to address three key questions relating to electric vehicles, lithium, and batteries:
- Why Now?
- What does this Growing Demand Mean for Lithium Prices?
- Do Rising Lithium Prices Hurt Battery Producers?
Why Now?
While electric vehicles have previously been viewed as a gadget for affluent early adopters, EVs appear to be on the verge of going mainstream. A major driver of this change is a major reduction in battery costs, which has made EVs much more affordable relative to traditional combustion engine-powered vehicles. Bloomberg’s New Energy Finance unit found that lithium-ion battery costs fell by nearly 50% from 2014 to 2016 as battery producers raised output and competition increased.1 Falling battery costs along with simpler engine designs and cheaper ‘fuel’ are making consumers around the world seriously consider EVs. Nowhere is this more apparent than in China, which made up over half of the world’s EV market in 2016, and a quarter of the world’s plug-in hybrid sales.2
Another important catalyst for EV sales is government policy. Some governments have historically helped improve the economics around EVs by providing generous subsidies to car buyers. But now regulations are being taken to a whole new level by setting end-dates for the sale of combustion engines. Here’s a list of countries that have recently implemented these policies and the number of new cars sold in these countries in 2016:3,4
- Norway (0.2m cars): new passenger cars and vans must have zero emissions by 2025
- India (3.7m): will ban the sale of new gasoline and diesel cars by 2030
- UK (3.1m): will ban the sale of new gasoline and diesel cars by 2040
- France (2.5m): will ban the sale of new gasoline and diesel cars by 2040
- China (28m): recently announced it will ban the sale of gasoline and diesel cars (official date still pending)
Source: https://seekingalpha.com/article/4109570-need-know-lithium
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