The EV Rollout Is Driving Lithium Stocks Bananas — Clean Energy Boom

One of the first things people put off buying during a crisis is cars.

It wasn’t any different when the coronavirus pandemic hit. Moody’s estimates that global car sales dropped by 16% in 2020.

But, what’s interesting though is that 2020 turned out to be a great year for electric vehicle (EV) sales.

EV sales around the world increased in 2020…even with the pandemic.

EV sales around the world were 3.24 million for the year, up from 2.26 million in 2019. Battery electric vehicles and plug-in hybrid electric vehicles upped their global market share from 2.5% in 2019 to 4.2% in 2020.

The increase was mostly driven by Europe, where EV sales increased by a whopping 137% from the previous year.

I mean; there’s a lot to like about EVs. They are quiet, have less moving parts and are easier to maintain.

Tesla was the company that sold the most cars, no surprise there.

In fact, Tesla deliveries around the world recently hit close to 500,000. That’s almost a fivefold increase from deliveries-only three years ago…impressive.

Even in Australia where there isn’t much of a push for EVs yet Tesla sales have been increasing.

According to The Driven, Tesla has sold over 10,000 EVs to Australia in the last six years, with 30% of those shipped only last year.

Truth is that throughout the pandemic electric vehicle sales have stayed quite resilient…

…and their global share is set to keep rising. Bloomberg New Energy Finance estimates the market share for new EV car sales around the world will increase to 10% by 2025, and reach 28% by 2030.

The Impact on Lithium Stocks

We are going to need massive amounts of lithium for all those EVs, along with battery storage needs for clean energy.

With EVs rolling out, lithium-related companies have been going nuts since the beginning of the year. I mean, check out the January price bump for Global X Lithium & Battery Tech ETF [LIT]:

Source: Yahoo Finance

[Click to open in a new window]

Lithium prices have been ramping up after dropping last year. Lithium carbonate prices in China are the highest in 14 months. Prices are up 25% since January 2020.

But there’s also concern that the current supply of lithium may not be enough to cover demand for all those EVs and storage batteries.

While there’s quite a bit of lithium around, another issue is if it’s economically viable to extract. There are concerns that we could be facing a lithium shortage as EVs take off in 2025.

In fact, it’s something lithium giant Albermarle warned recently.

From Reuters:

Global supplies of lithium used to make electric vehicle (EV) batteries will fall short of projections for demand to more than triple by 2025 if prices do not rebound to fund expansions, an executive at industry leader Albemarle Corp said on Tuesday.

Prices for lithium dropped last year due in part to the coronavirus pandemic, forcing Albemarle and peers to pause expansions, a step they will reverse only if the price is right, Eric Norris, who runs Albemarle’s lithium business, told the Reuters Next conference.

There was a lot of expectations for EVs to roll out in 2008 too, with oil reaching new highs…but it somewhat fizzled out.

Now though, things are happening fast, and there are a lot of factors that in my mind will push for EVs to increase this time.

I mean, EV car sales are increasing, even with oil at lows. Car manufacturers are producing more models.

The technology too is getting cheaper. Battery prices are falling…quick.

Battery prices have fallen 87% since 2010 from US$1,000 per kw hour to US$156/kWh in 2019. BloombergNEF expects prices will reach US$100/kWh by 2023.

And then government policies are changing.

Take the UK, who recently banned car sales by 2030. While UK annual new car registrations dropped by 29% last year, EV’s market share is up by 10.7%.

So far, eight out of the 10 largest world economies have set up net zero emission targets in the next decades.

With Joe Biden in the White House, the US will increase that number up to nine. Biden is looking to set a net zero target for the US before his term is over and has pledged trillions for the transition.

This should all be a push for more EVs in our streets.

Lithium is soaring…but the roll out will benefit plenty more metals in demand for the new technology.


Selva Freigedo,
For Money Morning

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Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.

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