We’ve gone electric, and there’s no going back at this point. Lithium is our new fuel, but like fossil fuels, the reserves we’re currently tapping into are finite.
For September, a new all-time record was set … and it wasn’t even close. During the month an estimated 16,794 plug-ins were sold. A 67% increase over a year ago (10,134), and well higher than the previous record month – June 2016 (15,063). 2016 has also seen monthly gains all 9 months this year. For the year, ~110,171plug-ins have now been sold, which is an improvement of 34% versus the 82,204 sold through the first 3 quarters of 2015.
The U.S. market for plug-in EVs appears poised to surpass last year’s total sales of 116,100 vehicles. Deutsche Bank predicts sales in the U.S. will reach 1.5 million by 2025. Demand for lithium is growing along with EV sales, as the supply chain struggles to keep pace. Deutsche Bank further predicts that demand for lithium in rechargeable batteries will more than triple by 2025, to 535,000 tonnes from 160,000 tonnes in 2016.
Global automakers are rushing to capture market share in the new EV market, unveiling new models and substantial new investments in their EV businesses, including lithium ion battery production. Recent examples include:
· Volkswagen AG will partner with a leading battery manufacturer (potentially Panasonic or LG Chem) to build their own “Gigafactory” to support their sales goals of 2 to 3 million EVs by 2025;
· Mercedes is reportedly set to unveil their fleet of EVs (2 sedans, 2 SUVs), plus a heavy duty truck, via its parent company Daimler AG;
· Tesla Model 3 sales reached ~373,000, almost quadrupling even the most bullish of analyst expectations from the time of unveiling;
· Hyundai announced plans to make EVs a significant part of its portfolio, with plans to introduce 26 EV models by 2020.
Pre-orders for the highly anticipated, relatively affordable Tesla Model 3 electric car caught even the perennially optimistic Tesla Motors CEO Elon Musk by surprise when it went on sale on March 31st. Worldwide pre-orders for the new lower-priced electric car hit 276,000 during the first weekend, prompting Mr. Musk to tweet that Tesla will “definitely need to rethink production planning,” including building a European factory to keep up with regional demand. Pricing for the Model 3 starts at $35,000 and the car has a range of almost 350 kilometres per charge.
So what does this all mean for lithium demand?
Simon Moores of Benchmark Mineral Intelligence noted that at 180,000 pre-orders this “could do a lot for lithium demand… [as] pre-orders will increase demand for lithium hydroxide by 20 to 30 percent.” Furthermore, Mr. Moores expects this will lead to rapid progress on critical materials supply agreements, as the market is already seeing supply shortages and higher prices with the Tesla Gigafactory yet to come on line. He believes that the success of the Model 3 launch “shows that full electric vehicles are here to stay.”
The global automotive industry is reacting quickly to this new reality. This type of sales growth will continue to drive an increased demand for the lithium needed in rechargeable batteries, creating opportunities for new lithium suppliers, like Avalon, to serve this rapidly growing market.