Tesla beat earnings expectations Tuesday, reporting record profits of more than a billion dollars last quarter. The electric vehicle market, while still small, has grown rapidly this year.
Of course, a global shortage of microchips could slow things down. In the long term, there’s also the issue of availability of lithium. It’s a soft, silvery metal that’s the key component in electric car batteries.
Chris Berry, a strategic metals consultant and president of House Mountain Partners, says demand for lithium is expected to triple in the next five years, which is why some automakers, like GM, have taken the unusual step of making deals with lithium mines directly. The following is an edited transcript of our conversation.
Chris Berry: It’s unprecedented. Typically the supply chain for the lithium ion battery is very fragmented. I mean, the lithium comes from one or two parts of the world, like Western Australia, or the lithium triangle in South America. It’s refined and basically built into batteries in parts of Asia, and then those batteries can be put into electric vehicles in other parts of the world. The fact that the automotive manufacturers are going directly to the mine sites to lock up five-plus years of supply is unprecedented.
Meghan McCarty Carino: Why wouldn’t an automaker do this? Why wouldn’t they have a direct supply to the raw materials themselves?
Berry: Well, typically, the lithium demand has really grown at about 5% or 6% per year, historically. Now, that lithium demand is growing at 20% per year, and I think that’s probably going to continue throughout the remainder of this decade. This is why the automotive manufacturers are now not able or not willing to rely on some of their suppliers or some of their partners, and they’re going directly to the miners themselves. If it’s going to take you seven, to 10, to 12 years to bring a new lithium mine on stream, you’ve got to go and just make sure as an automotive manufacturer that you have that 10-year line of sight on your supply. Otherwise, you’re gonna lose market share.
McCarty Carino: What’s at stake with all this, then? I mean, could we see as demand increases for these raw materials, electric vehicles become more expensive?
Berry: Perhaps, and that’s another good question, and that’s something that a lot of folks along the supply chain are worried about. The price of lithium battery grade lithium carbonate, which is one of the two lithium chemicals that can be used in batteries, it’s doubled off of its COVID lows from about a year ago. And so, that does directly feed into the cost of the battery. I will say that a lithium ion battery in a car is about 30% of the cost of that car, so that’s why so many people are focused on lowering, basically chemistry advances for the batteries. Because, if you can make the batteries cheaper, all of a sudden, then you get to that sort of Nirvana. I think that we’re all thinking around the really ubiquitous use for electric vehicles. Right now, it’s really a cost issue.
McCarty Carino: What makes lithium so special?
Berry: Well, first of all, it’s the lightest of all metals. It’s number three on the periodic table. So, if you just think about the weight of the metal or the weight of the battery in the car, obviously, the lighter, the better for range, and so on and so forth. Number two, its capacity to hold a charge is almost unparalleled, so it’s a very energy dense metal. And then number three, lithium ion batteries have been used in commercial applications, phones, tablets, camcorders, what have you, for about 30 years. So there’s a very, very long track record of safety with respect to lithium ion, and so that’s obviously what automotive manufacturers are really looking for the blend of those three attributes.
McCarty Carino: Are there any viable alternatives right now?
Berry: Not really. Certainly not when you’re talking about automotive applications because, as I mentioned earlier, those attributes of being very lightweight and energy-dense and also the track record of safety. I think when you think about the battery business, the storage battery business, you really segment it into the automotive sector and the grid scale storage sector. So pairing, for example, batteries with solar or wind, and there are other, I would argue perhaps better suited chemistries like vanadium redox or sodium sulfur batteries that could be used in the grid scale area. But look, they lose right now based on cost. Lithium is also, because it’s ubiquitous, it is the most cost-effective battery based on dollars per kilowatt hour.
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You heard Chris Berry mention some alternatives to lithium batteries that aren’t yet great for cars but could be promising for electrical grid storage. Last year on the show, Molly Wood talked to a couple of engineers at UC Berkeley, who are actually also married to each other, about how innovations in batteries could make our energy systems more sustainable and resilient in the face of climate change. It’s all about storing the energy generated by renewable sources like wind and solar.
One option — that’s definitely too heavy for cars — is iron batteries, which were profiled in the Wall Street Journal last week. Iron is abundant, it’s easy to extract and non-toxic. The batteries are still being tested in development, but they should be able to hold power longer than lithium ion batteries. And they’re less likely to catch fire … which seems pretty key.