Electric vehicles are poised to make the largest global impact since the internal combustion engine and emerging markets will have a huge role to play – not just in terms of providing the end-market demand, but in supplying the essential raw materials for the batteries powering them.
The success of electric vehicles rests massively on battery strength and quality. As a result, development of power cells of the highest specification, with lithium a vital element, is an absolute priority for manufacturers. Due to the proliferation of smartphones and other devices, lithium demand has grown rapidly. With the batteries for electric vehicles requiring at least 10 kilograms of lithium (compared with only 3 grams for a smartphone), there is clearly long-term structural demand.
The largest reserves by far are in EM countries. Chile (one third of the ‘lithium triangle’, with Argentina and Bolivia) has estimated reserves of 7.5 million tonnes, around half of the global total and the country is second only to Australia in terms of its current mine production (12 thousand tonnes in 2016). China too has reserves of more than 3 million tonnes (by comparison, the US reserves are an estimated 38 thousand tonnes).
Source: Martin Currie and Statista (USGS)
As the industry gears up for take-off, EM companies and governments alike have much to gain as they attempt to maximise the benefits of the so-called ‘white oil’. Chinese and Korean investors have reportedly been in advanced talks to build a new US$2 billion battery factory in Chile, rivalling US electrical vehicle pioneer Tesla’s Gigafactory in Nevada, while Argentina, the world’s third-largest producer (currently classed as a frontier market by MSCI) is courting investment by scrapping an export tax on mineral products and halting a ban on companies sending profits overseas.