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The electrifying challenge the lithium industry faces

The lithium industry is bracing for a seismic shift as a Benchmark analysis reveals that a staggering $116 billion investment is needed by 2030 to fulfil the ambitious targets set by governments and major automakers. This substantial sum is more than double the $54 billion initially estimated and is critical to support the growing demand for lithium in the rapidly expanding electric vehicle (EV) market.

The “high case” scenario presented by the analysis relies on automakers achieving their EV production targets and a surge in electric vehicle adoption spurred by government decarbonisation policies worldwide. If realised, this scenario would require a significant increase in lithium production capacity, emphasising the urgent need for investment.

Cameron Perks, an analyst at Benchmark, commented on the challenges ahead, stating, “It’s almost impossible, and definitely a race against time. The big money that needs to be spent takes time to get approval for and to deploy.”

To meet the high case demand, substantial investments are needed in building new mines, refineries, and expanding existing assets. Even with all the currently planned assets coming online on schedule and reaching their projected production capacities, the world would still require an additional 1.8 million tonnes of lithium to fulfil the high case demand.

Benchmark’s high case scenario predicts a demand of 5.3 million tonnes of lithium carbonate equivalent (LCE) in 2030, compared to the current production of 915,000 tonnes LCE. The optimistic targets set by automakers, including General Motors, Mercedes-Benz, Stellantis, and Tesla, are a key driver behind the escalating demand for lithium. These automakers aim to produce a substantial portion or all of their vehicles as electric by 2030.

However, fulfilling these ambitious targets is a daunting challenge, as Benchmark’s lithium production forecast for 2030 indicates a capacity of only 3.2 TWh of lithium-ion batteries, significantly falling short of the 7.0 TWh needed for the high case scenario.

To secure their lithium supply and overcome potential bottlenecks, automakers are increasingly investing directly in lithium-related projects. For instance, GM announced a $650 million investment in Lithium Americas, Tesla is constructing its lithium hydroxide refinery in Texas, CATL established joint ventures with lithium producers, and BYD is investing billions to build a battery plant and lithium carbonate facility.

Beyond automaker targets, the rise in demand is driven by ambitious governmental policies worldwide aimed at reducing carbon emissions from the transportation sector. Countries like the US, the UK, and the EU have set aggressive targets for electric vehicle adoption, further fuelling lithium demand.

A range of subsidies for EVs, such as the Inflation Reduction Act in the US, which offers tax incentives of up to $7,500 for qualifying EV purchases, also contribute to the increased demand.

Despite the substantial challenges and investments required, meeting the ambitious targets in the high case scenario is crucial to combat climate change and accelerate the global transition towards sustainable transportation. The lithium industry is at a crossroads, and strategic decisions and investments made now will determine its ability to meet the world’s evolving demands in the coming decade.