Lithium Investors Keen on New Federal Fuel Economy and Emission Standards

- April 7th, 2010

Lithium investors and many automaker stakeholders welcome the uniformity of a national standards, although the application of these standards are expected to raise the cost of vehicle production an estimated $434 per vehicle in 2012, and escalating to $926 per vehicle in 2016.

By Dave Brown – Exclusive to LithiumInvestingNews.comLithium Investors Keen on New Federal Fuel Economy and Emission  Standards

Last week, the Obama administration officially set tougher fuel efficiency standards for all new cars and trucks to be manufactured between 2012 and 2016. The result is that the US government has joined collective forces with the National Highway Transportation Safety Administration and the Environmental Protection Agency to outline a comprehensive set of regulations that will dramatically increase national standards for fuel economy.  Lithium investors and many automaker stakeholders welcome the uniformity of national standards, although the application of these standards are expected to raise the cost of vehicle production an estimated $434 per vehicle in 2012, and escalating to $926 per vehicle in 2016.  Automakers are expected to produce new models of electric vehicles, hybrids, plug-in hybrids and hydrogen fuel cell automobiles in greater numbers to meet the targets and get bonus credits.

The new efficiency standards include an EPA regulated emission output of 250 grams of carbon dioxide per mile for vehicles sold in 2016 – a figure that will be equal to the expected output by vehicles that matches the 34.1 mpg standard. This becomes the first ever regulation by the EPA on greenhouse gas emissions by vehicles and both the agency and the NHTSA insist that despite higher costs for vehicles, consumers will save more than $3,000 in fuel over the life of the vehicle due to the increased fuel efficiency.

Many auto dealers are less optimistic about the impact of these standards on their business.  Ed Tonkin, chairman of the National Automobile Dealers Association, issued a press release stating, “America’s new car and truck dealers support higher fuel economy standards, but recognize that for most Americans a car or truck is a necessity, not a luxury. Under these new mandates, the price of new cars and light trucks will rise significantly, meaning fewer Americans will be able to buy the new vehicles of their choice.”

With virtually every major automobile manufacturer planning an electric vehicle launch, and international governments funneling billions of dollars into smart grid technologies, the applications and attention for energy storage technologies is attracting a lot of attention.

A bullish report from Lux Research has suggested the market for batteries, supercapacitors and fuel cells targeting transportation and smart grid applications will more than double from $21.4 billion in 2010 to $44.4 billion in 2015.  The analysis provides coverage of a number of clean technology advancements, including: fuel cells in transportation and storage, batteries, supercapacitors and distribution storage technologies on the power grid.

A critical takeaway from the report is the forecast that electric vehicle storage technology markets will nearly double with a compound annual growth rate (CAGR) of 13.5 percent from approximately $7.7 billion in 2010 to $14.5 billion in 2015.  Electronic bike (e-bike) and scooter battery markets represent the highest growth, increasing from $6.4 billion this year to $10.9 billion in 2015, a CAGR of 11 percent.  Currently lead-acid batteries dominate transportation markets, but lithium-ion technology is rapidly growing. This year, lead-acid batteries will drive over 90 percent of China’s e-bikes, however, lithium-ion batteries in e-bikes are growing almost three times faster than those for lead-acid with a CAGR of 22 percent through 2015.

April 7, was a good day for some lithium mining stocks with the Byron Capital Markets Lithium Index appreciating 3.5 percent from the previous session, however, this data is slightly skewed as the top performer, North Arrow Minerals (TSX-V:NAR), significantly outperformed with a 25 percent increase on the day.

Company News

On April 2, at the 2010 New York Auto Show, Hyundai (KSE: 005380) unveiled its brand new 2011 Sonata Hybrid Bluedrive. The new model represents Hyundai’s first hybrid and includes a number of bold technological innovations such as a set of next generation lithium polymer batteries. As a full parallel hybrid, the Sonata can operate solely on its electric motor, its combustion engine, or a combination of both.

Currently, all other hybrids on the road use the older nickel-metal hydride batteries, although some new hybrid models that are set to be released this year will utilize the lighter and higher energy density lithium-ion batteries. No other auto manufacturer has yet to adopt the next generation lithium polymer batteries that Hyundai will include as a standard on every Sonata Hybrid. These lithium polymer batteries are superior for vehicle applications due to their durability and higher power density than even lithium-ion batteries, and are already common in portable consumer electronics.

Initially, the market was very receptive to the news, sending the stock from its close on Friday at US $106.83 (KRW 121,000) to its closing price by the end of Tuesday’s session of US $115.05 (KRW 130,500).  The current valuation for the Korean automobile manufacturer is US $113.55 (KRW 128, 000).

With help from Assistant Editor Vivien Diniz

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