Executive Summary: Western Automakers and Upstream Mineral Investments Pt. 1
Let's get Vertical
After a small break to focus on final papers, we are back with another edition of Non Ferrous Flows. This time around, we are examining how American and European automakers are securing the minerals necessary for their new fleets of Electric Vehicles (EVs) (full deep dive article on the website). What started out as offtake agreements (agreeing to buy “x” amount of a given mineral, often before mine production starts) have in some cases escalated to direct investments in mines and mining companies. Each American and European car company has approached this challenge differently, so we are going to examine some of the major companies (Stellantis, Volkswagen, GM, Ford, Tesla, and BMW) to see how they are constructing their unique mineral portfolios. This article has kept getting bigger, so we’ve decided to split it into two sections. Section one, covering Stellantis, Volkswagen, and General Motors, is now up on the website, and the executive summary is below.
As always, the subtext of this trend is mineral dominance in China and attempts by Western corporations to uncouple their supply lines from the Chinese market. We’ll also explore what it means for other countries in the Asia-Pacific, and how major metals producers in the region could benefit.
Why is my carmaker buying a lithium company?
Over the last several years, we have heard major promises from automakers regarding the transition to selling EVs. However, these carmakers’ promises and business plans are facing the realities of the mining world, and the projected systemic undersupply of critical minerals, most prominently nickel, cobalt, and lithium.
Automakers have committed over $1.2 trillion to transition towards electric cars, and the trend of purchasing mines to ensure they have the raw materials can be seen as insurance against potential shortages threatening to hamper all investments down the value chain. International Energy Agency projects EV copper demand to quadruple by 2035, and nickel to almost quintuple for the same year. In case those demand numbers are not matched by supply, auto companies will not need to go to market to fund their EVs, but rather, rely on already purchased assets. Alongside the construction of new battery facilities and refurbishing factories, automakers are earmarking part of that money on a new venture — purchasing upstream mineral assets. Recently, we have seen automotive companies take a greater interest in the full value chain, first by signing pre-paid offtake agreements, and now more interestingly, by investing in mines and mining companies themselves.
Today we’ll ask some key questions — what metals are automakers concerned about, where are these companies investing, and are companies all following the same trajectory?
Stellantis’ strategy: secure access to as wide a variety of metals as possible (including copper and rare earths) through buying equity in junior miners and securing offtake agreements.
VW’s strategy: use the company’s global footprint to invest in core battery materials (lithium, cobalt, and nickel) around the world (including Asia, Europe, North America, and South America), and pursue riskier opportunities in Asia
GM’s strategy: Secure core battery materials (nickel, lithium, cobalt), but invest heavily in riskier new lithium extraction within the United States