Japanese Automakers Toyota and Mazda Team Up to Develop Electric Cars

The companies will work together to develop electric cars and plan to build a $1.6 billion plant in the US.

Japanese automakers Toyota (NYSE:TM) and Mazda Motor (TYO:7261) plan to build a $1.6 billion auto manufacturing plant in the US and work together to develop electric cars, the companies said on Friday (August 4).
According to Reuters, the alliance is an attempt to catch up with rivals in the race for electric car technology.
“What’s different from the past is that there are no nautical charts for us to follow. It’s without precedent,” Toyota President Akio Toyoda said of the push into alternatives to the internal combustion engine.

Toyota, the world’s second-largest automaker by vehicle sales last year, has set a goal for all of its vehicles to be zero emission by 2050 and have them on the market by 2020.
Meanwhile, Mazda lacks the funds to develop electric cars on its own, but plans to launch them by 2019. The deal will allow the small automaker to expand production in the US while both companies will produce EVs independently.
“Mazda needs electrification technology. In the past, they’ve pooh-poohed EVs, they’ve felt they can make internal combustion engines more efficient, but the bottom line is that globally you need to have this technology,” said Janet Lewis, head of Asia transportation research at Macquarie Securities.
Both automakers have been slow to enter the EV space, with Toyota betting on hydrogen fuel cell vehicles instead of pure electric cars, like rivals Tesla (NASDAQ:TSLA) and Volkswagen(FWB:VOW). That said, the joint venture is another sign of the electric car revolution accelerating faster than expected.
Other carmakers, including Volvo (STO:VOLV) and BMW (ETR:BMW), have also recently said they plan to electrify most of their car models by the end of the decade. What’s more, France and the UK have outlined policies to turn to electric cars and stop all sales of fossil fuel cars by 2040.
What’s more, according to Bloomberg Energy New Finance, electric vehicles are on track to accelerate to 54 percent of new car sales by 2040; analysts at UBS (NYSE:UBS) expect global electric vehicle sales in 2021 to reach 3.1 million units and 14.2 million units by 2025.

Will the lithium market keep up with demand?

As electric cars numbers increase, the need for lithium-ion batteries will also soar. In fact, Transparency Market Research estimates that the global lithium-ion battery market sat at $30 billion in 2015, and will rise to more than $75 billion by 2024.
According to Benchmark Mineral Intelligence, surging demand for electric vehicles is expected to push demand for lithium-ion batteries above 400 GWh by 2025. As a result, most analysts expect global lithium output to reach 400,000 to 500,000 tonnes by the same year.

But the lithium industry is expected to struggle to keep up with this soaring demand, as bringing projects into the market is not always easy. New mines can take years to start producing at full speed, and a lack of timely investments could curb supply in the years to come.
“It is our expectation that the lithium industry will struggle to keep up with demand between now and 2021. [We don’t expect an] oversupply [in the market],” said Benchmark Mineral Intelligence Managing Director Simon Moores.
Click here to read more about what happened in the lithium market in Q2 and what to expect in the next few months.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.