Automakers Are Pouring Billions Into Mining

Written By Luke Burgess

Posted March 1, 2023

As electric vehicles gain traction, there has been a surge in demand for battery metals such as cobalt, lithium, nickel, and copper.

But for automakers, getting their hands on these metals isn't always easy since supply chains are highly complex and competitive. To address these challenges, EV makers are going straight to the source.

Over the past several years, automakers are increasingly entering in joint ventures directly with miners to secure a reliable supply of battery metals.

In 2019, for instance, Volkswagen signed a memorandum of understanding with Ganfeng Lithium for long-term lithium supplies. The following year, BMW signed a five-year cobalt supply agreement with mining and trading firm Glencore that's worth $2.3 billion.

Meanwhile, Tesla entered into an agreement with Piedmont Lithium in 2022 to supply 125,000 tonnes of refined lithium ore.

Most recently, automaker Stellantis — which includes brands Chrysler, Dodge, Jeep, Maserati, Peugeot, and Ram, among others — announced it would invest $155 million into a copper company owned by McEwen Mining.

The investment is part of Stellantis' ongoing efforts to secure a sustainable and reliable supply chain for critical materials used in the production of electric vehicles.

The partnership is particularly significant given McEwen Mining is also a miner of gold and silver. Tiny amounts of precious metals like gold and silver are used in a range of components, including wiring, connectors, and electronic control units.

These direct joint ventures offer benefits for both automakers and mining companies.

For automakers, they provide a reliable and cost-effective supply of critical materials, reducing the risk of shortages and price volatility.

For mining companies, these partnerships offer a stable customer base and the opportunity to develop long-term relationships with their clients.

However, there are also potential challenges to consider.

One concern is that direct joint ventures may lead to a concentration of power in the supply chain, with a few large automakers dominating the market and potentially squeezing out smaller players.

Moreover, these partnerships may limit mining companies' ability to sell to other customers, potentially reducing competition and innovation in the market.

To address these concerns, it will be important for automakers and mining companies to ensure that their partnerships are structured in a way that promotes competition and innovation. This might involve developing industry-wide standards for sustainability and ethical sourcing, as well as creating mechanisms to promote transparency and fair pricing.

In conclusion, the trend of automakers entering into direct joint ventures with commodities miners to guarantee supplies for EV battery manufacturing is likely to continue as demand for these critical materials continues to grow.

While there are potential challenges to consider, these partnerships offer significant benefits for both automakers and mining companies alike, and can help create a more stable and sustainable supply chain for the EV industry.