Changes on the horizon for the electric vehicle market

In our previous blog we identified five roadblocks that impede greater market penetration for electric vehicles (EVs). But the future is bright for lithium producers. No other metal faces such a strong and positive outlook.

Achieving longer range with solid state batteries (SSB)

Exciting developments are happening in the SSB space. Replacing electrolyte in the battery with a solid instead of using organic solvent liquid electrolyte achieves two things: higher safety and packing more energy density by downsizing the pack. This gives the EV a higher range (500 to 600 miles+) without compromising safety. Toyota plans to introduce a solid state battery car prototype by 2020, two years earlier than planned.

Investors are moving in

We could expect an increase in charging investments, catching up with the time lost. In 2019, there has been a massive increase in investments from governments, utilities, auto OEMS, and oil and gas companies. The UK government has set up a £400 million fund to accelerate investments in charging infrastructure, while VW plans to invest in 36,000 charging points within the EU by 2025.

Supercharging the battery supply chain

The global battery supply chain is ramping up investments. There are close to 100 gigafactories in the pipeline for battery manufacturing, which could increase the capacity up to seven times in the next decade. About three quarters of them are being planned in China. Thirteen gigafactories are being planned in Germany, Hungary, the Czech Republic, Poland, and Sweden–a much-needed shot in the arm for the EU.

Finding its niches

There are exciting developments happening on new EV models. BMW plans to launch twenty-five new EV models by 2023. VW plans to launch seventy new models and electrify 20% of its vehicle production by 2030. Recognizing the range anxiety is of much lesser scale in India–Tata Motors Limited has launched its first EV model, Tigor, which runs 213 kilometers on a single charge.

The grid

Peak loads on grids can be managed by differential pricing of electricity or home energy storage options. Further to this, with the development of autonomous mobility, vehicles can be moved around charging stations to charge during the day, thereby spreading out the loads.

The new kid on the block: hydrogen

The EV landscape may not be limited to a single-technology lithium-ion battery: hydrogen can emerge as another alternative to fossil fuels. Early development is showing promise of a much higher range (close to 400 miles) compared to lithium. Commercial vehicles and industrial off-highway vehicles will see the most penetration by fuel cell electric vehicles (FCEVs). For such vehicles, lithium-ion battery technology may not provide sufficient power. Importantly, hydrogen’s advantage is faster refueling, lighter vehicles, and it can use the existing pipeline network for transportation. Significant investments are being committed to development of FCEVs in China, Japan, and South Korea. Companies like Anglo American plc are already on the path to develop FCEV mining trucks. Two challenges remain, typically symptomatic in the early stage of technology development:

• Regulatory landscape on the handling and transportation of hydrogen, which can be expected to ease as governments start getting familiar with the technology, risks, and mitigation.
• Policy support measures in the form of subsidies are not made available for FCEVs, but that will get addressed as technology develops and matures.

What lithium producers should be looking for to better manage volatile supply and demand

Lithium’s fate is sealed. Its future is tied to the world transitioning to a low carbon world. Dynamic changes in battery technology and potential alternatives will underpin the future. No other metal faces such a strong and positive outlook. Producers must constantly keep an eye on technology developments in EVs, FCEVs, and battery chemistries. The lithium industry must then keep validating its long-term demand model on the basis of technological developments. Lithium is at the very early stages of market development and given the time scale of project development supply, can be expected to undershoot or overshoot demand starting a cycle of sharp volatilities. Ultimately, when EVs get mainstreamed as the dominant mode of mobility, lithium will get more integrated into the automotive supply chain. The lithium industry will need to learn from the business models and gain experience from the auto industry's steel producers who have operated in these supply chains.