Elon Musk is excited about lithium batteries as “the new oil”

In the year 2023, a mineral that plays a crucial role in the manufacturing of electric vehicle batteries has garnered a significant amount of attention from industry leaders. The CEO of Tesla (TSLA), Elon Musk, has gone on record describing lithium batteries as “the new oil” and earlier this year, he urged entrepreneurs to focus on producing more lithium to address concerns regarding a refining capacity “choke point.”

Musk emphasized his point by saying, “Instead of making a picture sharing app, please refine lithium,” during Tesla’s earnings call in April. Subsequently, oil giant ExxonMobil (XOM) announced its plans to extract lithium in southern Arkansas, aiming to become a key supplier of the material.

Demand Set to Double:

The demand for lithium is expected to double worldwide between 2025 and 2030 as more consumers opt for electric vehicles. According to research carried out by Goldman Sachs, EVs are projected to constitute about half of new car sales around the world by 2035. In the US, the market share for EVs recently reached a record high of 7.9%, with sales in the third quarter of the year showing a nearly 50% increase as compared to the previous year, totaling 313,000 units.

The US government has set a goal of having 50% of all new vehicle sales be electric by 2030. The Inflation Reduction Act (IRA) passed by the Biden administration offers $7,500 tax credits to qualifying house holds, thereby incentivizing the adoption of electric vehicles.

Graham Harris, the chairman of Surge Battery Metals (NILI.V), which is responsible for developing a lithium claystone project in Elko County, Nevada, pointed out that while there is a significant amount of lithium available, the process of extracting it is quite different. The US, at present, only produces about 1% of the global lithium supply. Harris believes that the focus in the upcoming years should be on developing a domestic lithium supply.

Prices Falling with Demand:

In contrast to the rising demand for electric vehicles, 2023 has seen a decrease in the demand for lithium, leading to a downward trajectory in prices. Although the critical silvery-white soft metal is not traded on a major exchange, the prices in China, where they are made public, indicate a steep decline year to date. After reaching all time highs and going beyond $80,000 per metric ton in 2022, the prices of lithium have plunged below $20,000 in November. Albemarle (ALB), a lithium producer based in North Carolina, reduced its full year guidance for 2023 due to “softer” market pricing.

Kent Masters, the CEO of Albemarle, expressed concerns about the potential challenges for the growth of EVs in the US. Reduced EV forecasts, coupled with high interest rates and affordability concerns, are expected to translate into a decrease in lithium demand growth, with UBS analyst Joshua Spector and his team predicting a decline from 30% to 22% in 2024.

Seeking Independence:

The increased focus on lithium in the US stems from the country’s ambition to achieve battery independence, as much of the world’s refinery of the lightweight metal takes place in China. The country’s battery manufacturers supply an estimated 80% of cells worldwide. Despite the ambitions, Irina Tsukerman, the president of market research and geopolitical risk advisory Scarab Rising, has a low view of America’s prospects for the critical mineral. She believes that in the very long term, the future of lithium is doomed due to the difficulties involved in its refinement process, which has essentially become a monopoly of China.

Meanwhile, some car makers are working on developing technologies that could potentially replace lithium in the long run. Chinese EV maker BYD plans to construct a $1.4 billion sodium-ion battery plant, and Sweden’s Northvolt AB recently announced a major breakthrough by developing a battery without critical minerals in it.

Scalability a Key Issue:

Harris, of Surge Battery Metals, does not anticipate a shift in the demand for lithium anytime soon, as the commercial viability and scalability of lithium-ion technology has made it the technology of choice. He did, however, note that while another technology may eventually surpass lithium-ion in the future, this change is not expected to occur in the near future.

Ines Ferre, a senior business reporter for Yahoo Finance, highlighted the importance of ongoing tracking of the latest stock market news and events. Additionally, she emphasized the value of staying updated on the latest financial and business news from Yahoo Finance.

In conclusion, the attention on lithium batteries as “the new oil”, is driven by the growing demand for electric vehicles, has become a focal point for industry leaders and policymakers. Both the US and global markets are making steady progress towards achieving substantial adoption of electric vehicles, shaping the landscape for the future of lithium in the car and technology industries worldwide.

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