Automotive manufacturers and governments have set aggressive targets for electric vehicle adoption. In the US, the crux of the transportation policy plans for 1 million electric vehicles within the country by 2015. However, US auto and policymakers have found it difficult to market electric vehicles to consumers in trying economic times. Likewise, China and Europe are experiencing similar shortfalls.
Charles de Lusignan, Communications Manager for the European Automobile Manufacturers’ Association (ACEA), told Lithium Investing News “Electrically chargeable vehicles have a place on Europe’s roads, and their use is growing. Presently the industry predicts that in 2025 electrically chargeable vehicles will make up three to 10 percent of the market, depending on how quickly the various technological, infrastructure and socio-economic challenges can be addressed. Even as the electrically chargeable vehicle develops, the industry expects that for the foreseeable future the combustion engine will remain a popular propulsion method, buttressed by alternative and hybrid drivetrains.”
Technological progress is vital
De Lusignan believes that electric vehicle adoption rates, “will rise as the vehicles themselves get more cost-effective, but the speed of cost reduction will depend on the effects of rising economies of scale and changes in the whole supply chain (also including infrastructure) as well as further technological development. As the technology is still developing, it is still expensive. This is normal with any period of technological change, and the price will come down to certain extent as demand picks up and as the systems mature.”
Jean-Francois Tremblay, Advanced Mobility Leader at Ernst & Young’s Global Automotive Center, sees a global shift in views on vehicle ownership. The most critical consumers for electric vehicles in the future will be fleet managers, rather than individuals, with challenges for consumers and manufacturers oftentimes being regionally based. “[T]he market is evolving and we are seeing this already towards a ‘mobility solution’ driven market instead of a ‘product’. We are going into an era where we are talking about people who don’t necessarily need to own one vehicle. They want to own an option to different mobility solutions.”
As with any shift away from the norm, it becomes difficult to anticipate dynamic and radical behavioral changes.
Echoing the difficulty of anticipating electric vehicle purchases, de Lusignan states, “it is extremely difficult to provide detailed forecasts as to future consumer uptake. Manufacturers have and are investing heavily in the technological development of electrically chargeable vehicles, but as yet the high price has limited their appeal, and if prices fall other exogenous factors may come into play that may influence demand.”
Chinese sphere of influence
Pike Research Group expects the plug in electric vehicle market in China to grow at a compound annual growth rate (CAGR) of 60 percent over the next five years; however, that represents less than 1 percent of the total market for light duty vehicles in that country. China is now considered the largest global marketplace overall for vehicles, and the nation boasts a unique position to become a significant exporter of vehicles due to favorable manufacturing conditions and labor costs. For lithium investors it is also of interest as the country has the potential to become a key competitor in the lithium battery market for electric vehicles.
Lithium investment implications
At present, battery manufacturers represent approximately 23 percent of demand for lithium. Historical and current demand for lithium batteries is predominantly from mobile phones, power tool products, laptops, notebooks, and tablet computing industries underscoring the lithium battery industry over the past 10 years. However, the growth momentum in the next decade for the lithium battery industry has been widely anticipated in power battery systems for the electric vehicle market and household energy storage systems.
Research on lithium for large battery applications continues to progress and is already considered by the USGS to be in an “advanced stage.” Future light vehicles are expected to utilize electric motors with large, lightweight batteries, and lithium’s high charge-to-weight ratio makes it the obvious technological favorite at this point. Linking the demand for the lithium to demand for electric vehicles is a critical function of future opportunity.
Since the forecasts of demand for lithium products have already broadly discounted significant growth in the electric vehicle market, a question for investors will be whether global economic issues result in the reduced expectations for future global lithium demand. The risk at this stage is still the unknown variable for key supply and demand fundamentals which will ultimately affect the price of lithium. Additional capacity from new lithium projects and the inception of a secondary source lithium market from recycled batteries could provide additional challenges for operating conditions.
Securities Disclosure: I, Dave Brown, have no interests in the companies mentioned in this article.