Lithium: the benefits of global diversification in the electric vehicle industry

Expansion of the U.S. electric vehicle industry could face challenges in the form of domestic raw material sourcing, a key requirement of new tax credits under the Energy Reduction Act. inflation, Yahoo Finance reported.

Goals set by the Biden administration for the transition to electric vehicles aim to replace 50% of all new vehicles sold with alternatives to electric vehicles by 2030. The climate portion of the bill offers money to help support the construction of a national electric vehicle supply chain. in the United States, but it could face significant problems when it comes to finding enough lithium to power the transition. The new tax credits require that a certain percentage of components and parts be sourced from North America, a requirement that many US EV makers are already contesting based on unrealistic expectations.

“The world has changed,” Keith Phillips, CEO of Piedmont Lithium, a major U.S. lithium miner, said in an interview with Yahoo Finance Live. “We are now in a time where everyone will want an electric car. Automakers can’t make them fast enough, and people are now looking for the lithium they need to power the batteries of these electric cars.

Lithium is a key component of EV batteries, and although potential alternatives to lithium batteries are being researched and tested, for now lithium remains king. An EV battery typically requires around 17 to 22 pounds of lithium to manufacture, and lithium mining in the United States remains relatively rare at this time.

Piedmont Lithium, one of the few American miners, announced the opening of a lithium processing plant in Tennessee that will be able to process 30,000 metric tons of lithium per year, but obtaining permits for new sites in It’s a problem the Biden administration is tackling through the Defense Production Act as it tries to ramp up lithium and cobalt production, but demand is expected to outstrip supply for years to come. come, especially with the 2030 goals that the administration has set for itself.

“Yes well [eventually] enough, but not then,” Phillips said. “There is going to be a real crisis to get the material. We don’t have enough in the world to spin that much [lithium] production worldwide by 2035.

New mining projects, once approved, take between 5 and 10 years to come online. Currently, the Albemarle Silver Peak mine in Nevada is the only nationwide lithium mine producing a significant amount of supply.

This is an issue playing out on the global stage, with lithium supply currently dominated by China, followed by Australia and Chile. The incentives now exist in the United States to increase domestic supply, but it will take years to develop this supply potential.

“I think you’ll see companies looking at battery plants in different parts of the world or lithium conversion plants coming to America because that investment tax credit will be very valuable…The opportunity to market is huge,” Phillips said.

Diversify globally to unlock the full potential of electric vehicles

The transition to electric vehicles has become a global phenomenon, with many traditional automakers devoting much of their business to the development of electric vehicles. While demand is expected to grow, supply issues will present challenges for some electric vehicle markets. The KraneShares Electric Vehicles and Future Mobility ETF (NYSE: KARS) offers a good solution for investors looking to capture the growth potential of leading EV producers globally and offers potential for diversification beyond its peers.

KARS measures the performance of the Bloomberg Electric Vehicle Index, which tracks the industry broadly, including exposure to electric vehicle manufacturers, electric vehicle components, batteries, hydrogen fuel cells and raw materials used in the synthesis of the production of parts for electric vehicles.

KARS invests in many well-known automotive companies such as GM, Tesla, Ford, Mercedes-Benz, BMW and major Chinese electric vehicle manufacturers such as Li Auto, Nio and BYD, some of the largest companies in the global vehicle industry electrical. It has a spend rate of 0.70%.

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