Buying an EV May Be Harder Than Ever Soon -- Here's Why

This all goes back to the Big Bang.

Of course, everything goes back to the Big Bang, but right now we're talking about lithium.

DON'T MISS: Ford Makes Very Tough Decisions

This particular substance was synthesized in the cosmic kaboom that--in theory--explains how the universe began, but it is decidedly less abundant than other elements.

The lack of lithium hadn't been much of problem, since it was used mostly in ceramics and pharmaceuticals. 

But with the surge in electric vehicle production, the element whose name derives from the Greek word for "stone" is now the belle of the battery ball.

Global lithium demand is expected to outmatch lithium production in this year by around 3% at a time of growing adoption of electric vehicles in countries even as major producers boost output, S&P Global said in April, citing a report by Australia's Office of the Chief Economist.

EVs Boost Lithium Demand

Demand for lithium batteries equated to nearly 80% of all lithium use in 2022, the report said.

This ratio will only grow, moving up to 90% by 2028, as EVs add market share in the globe passenger car market, led by lower EV prices.

Lithium producers are reportedly getting tense in light of delays in mine permitting, staffing shortages and inflation, which could jam up their ability to supply enough of the battery metal to meet the world's aggressive electrification timelines.

"You could end up in a crisis situation where the battery companies don't have the security of (lithium) feedstock," Stu Crow, chairman of Lake Resources  (LLKKF) , said on the sidelines of the recent Fastmarkets Lithium and Battery Raw Materials conference in Las Vegas, according to Reuters.

"There's a disconnect between the panic that we're seeing here, and the frenetic activity of trying to secure supply within the industry," he said.

Lake Resources recently became the latest lithium company to announce a project delay, pushing back first production from its Kachi lithium project in Argentina by three years. It cited power supply and other logistics concerns.

Albemarle  (ALB) - Get Free Report, the world's largest lithium producer, expects global lithium demand to exceed supply by 500,000 metric tons in 2030. 

'A Big Challenge'

“It's a big challenge," said Eric Norris, head of Albemarle's lithium business.

There were 45 lithium mines operating in the world last year, with 11 expected to open this year and seven next year, according to Fastmarkets, far below what consultants say is needed to ensure adequate global supply.

And even if more lithium mines are built, there are not enough facilities to produce specialized types of the metal for batteries. Automakers may be forced to accept lower-quality lithium, which decreases an EV battery's range, executives said.

"There's a big difference between lithium that comes out of the ground and lithium that goes into a battery," said Sarah Maryssael, chief strategy officer for Livent  (LTHM) - Get Free Report, which supplies Tesla  (TSLA) - Get Free Report and is set to combine with rival Allkem  (OROCF)  later this year.

New alternatives to conventional lithium-ion are on the rise, the International Energy Association. 

The group said supply chains for lithium-free sodium-ion batteries are being established, with over 100 GWh of manufacturing capacity either currently operating or announced, almost all in China.

Get exclusive access to portfolio managers and their proven investing strategies with Real Money Pro. Get started now.