Electric vehicles, also known as EVs, are at the heart of the world’s efforts to reach aggressive net-zero carbon emissions goals.
Investment in electrified transportation, which includes EVs and charging infrastructure, hit a record $466 billion in 2022, an increase of 54% over 2021 levels, and those investments are translating to more EVs on the road.1 Add to that the fact that many governments are introducing legislation to incentivize both the purchase and sale of electric vehicles and the goal of electrifying the world’s transport fleet is trending in a positive direction.
Lithium-ion batteries are essential to the growing EV revolution, making lithium a much sought-after mineral, with demand expected to increase in the years ahead. This means that both lithium and the companies that extract and produce it could provide attractive investment opportunities.
Lithium-ion batteries have come a long way since their introduction in the small electronics and power tools of the 1990s. Now the most popular battery technology worldwide, their long cycle life and high energy density make them ideal for powering EVs and hybrid vehicles.
Today, lithium is one of the most important commodity in the battery metals space. And demand for lithium-ion batteries is projected to increase, with McKinsey & Company estimating an annual compound rate of approximately 33%2 over the course of the next decade.
Auto manufacturers are starting to deploy their capital accordingly to secure their required supply of lithium. One example of this is General Motors, which announced plans in early 2023 to invest $650 million in Lithium Americas to develop the Thacker Pass lithium project, which may become one of North America’s largest lithium mines.3
With EV adoption expected to climb, more than a dozen U.S.-based lithium-ion battery gigafactory projects were announced since 2021 and globally, lithium-ion battery capacity is expected to grow nearly 550%,4 from 2021 to 2031.
Lithium-ion batteries are also used to power electrical systems for certain aerospace applications, including the Boeing 787, a new model of aircraft with a design that reduces emissions and lessens its impact on the environment. The distinct advantages of lithium-ion batteries may lead to them eventually being used in large-scale energy storage systems to back up renewable energy sources.
All of this adds up to what we believe could be a bright future for lithium, a key critical mineral for the clean energy transition.
Over the course of the last few years, lithium has taken its rightful role on the grand stage of commodities that demand the attention of governments, citizens, companies and investors who seek to commit to net-zero emissions targets and evolve the way we power the planet.
Canada, the U.S., the UK and the EU are among the many governments that have declared lithium a critical mineral, and the wheels are in motion to develop new supplies in friendly jurisdictions to meet rapidly accelerating demand.
Lithium miners may be well positioned to benefit from increased investment in the low-carbon and renewable energy sector. They may offer an attractive opportunity to investors seeking access to lithium through companies that are upstream in the supply chain.
Sprott Energy Transition ETFs are designed to give investors access to critical minerals such as lithium, among many others, that are driving the global energy transition. To learn more, please visit the website sprottetfs.com or call 888.622.1813.
Footnotes
1 Source: BloombergNEF, Electrified Transport Spending Soars, Transition Rolls On, https://about.bnef.com/blog/electrified-transport-spending-soars-transition-rolls-on/.
2 Source: McKinsey & Company, Battery 2030: Resilient, sustainable, and circular; https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/battery-2030-resilient-sustainable-and-circular.
3 Source: Lithium Americas Announces Initial Closing of $650 Million Investment from General Motors; https://www.lithiumamericas.com/news/lithium-americas-announces-initial-closing-of-650-million-investment-from-general-motors.
4 Source: Federal Reserve Bank of Dallas, Automakers’ bold plans for electric vehicles spur U.S. battery boom; https://www.dallasfed.org/research/economics/2022/1011.
Special Note: Jesse Day is not an employee or an affiliate of Sprott Asset Management LP. The opinions, estimates and projections ("information") contained within this content are solely those of the presenter and are subject to change without notice. Sprott Asset Management LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Sprott Asset Management LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Sprott Asset Management LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.
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