The race is on to produce and acquire the raw materials that are the building blocks for electric vehicles and their batteries. Car and battery manufacturers the world over are locking up supply deals to ensure they have access to lithium, cobalt, and other key minerals that are needed for electric vehicle batteries. But the United States is losing this race.
For those that think electric vehicles are futuristic, think again. They’re already here and the rate at which car manufacturers are investing in them is hard to keep up with.
OPEC expects 266 million electric vehicles on the road globally by 2040 — yes, OPEC, the oil cartel. Bloomberg New Energy Finance, a research group, predicts there will be 500 million electic vehicles on the road by then. The question is not whether electric vehicles will dominate the world marketplace, but when.
There are 2 million electric vehicles on the road today, but don’t let that small number fool you.
The number of electric vehicles is growing rapidly due to several factors, including more efficient batteries, improved manufacturing techniques, and emissions standards and national efforts to strengthen energy security. Several nations, including the U.K., France, and India have announced plans to phase out sales of gasoline autos.
China wants to become the Detroit of the battery-powered electric vehicle industry. Electric vehicle sales in China have already eclipsed 1 million per year, and the Chinese government is putting its full weight behind efforts to increase the use of electric vehicles.
Although auto manufacturers are traditionally conservative, they recognize the great opportunity that a switch to electric vehicles presents. Volvo has announced it will only make all-electric or hybrid vehicles by the close of next year. In the U.S., Tesla has built the “Gigafactory,” the world’s largest battery factory, to meet the demand for its cars. When Tesla announced its Model 3, its first mass-market electric vehicle, it had hundreds of thousands of orders for the vehicle. But even more impressive is what’s happened in Germany, where Volkswagen recently announced a $25 billion deal to lock up battery supplies for its electric vehicle scale-up.
If electric vehicles hold promise for the future, they also illustrate some of the challenges that lie ahead. The demand for batteries is outpacing expansion of the supply chain for the minerals and metals that make them possible.
Demand for graphite, nickel, silver, manganese, and, most importantly, lithium and cobalt is soaring. Goldman Sachs dubbed lithium the new gasoline. The price of lithium carbonate, used to make batteries for electric vehicles as well as cellphones, jumped 335 percent between 2004 and 2016.
Bloomberg New Energy Finance expects cobalt demand to jump thirtyfold by 2030. Cobalt, in particular, presents a serious supply challenge. The Democratic Republic of Congo is far and away the world’s largest supplier, and it’s rife with armed rebellion, and, in the mines, suppliers rely heavily on child labor.
Our growing dependence on imported cobalt, lithium and other key minerals needed for battery development is part of an alarming trend: growing dependence on foreign minerals of virtually every kind. According to the U.S. Geological Survey, the U.S. is now entirely reliant on foreign sources for 20 commodity minerals. And we’re at least 50 percent dependent on other countries for 47 commodity minerals, and, of those, 24 come largely from China.
We don’t have to be this import-dependent, and there’s no reason we should be. The U.S. is blessed with a vast minerals resource base but our regulatory environment is so burdensome and costly that mining investment has fled.
Take our mine permitting process. It can take, and regularly does, 10 years to gain the necessary permits to open a new mine. In Australia and Canada, nations with environmental safeguards like our own, it takes just 18 to 24 months. It’s far past time to bring commonsense reform to the mine permitting process. Competing in the electric vehicle and battery race requires it.
Fortunately, some progress is being made. The Trump administration has acknowledged the threat of our growing reliance on minerals imports and issued a presidential order aimed at curtailing our growing import dependence. The Department of the Interior wants to identify new domestic sources of 35 critical minerals, including lithium and cobalt, and increase domestic exploration. Rep. Mark Amodei’s, R-Nev., National Strategic and Critical Minerals Production Act, which would streamline the mine permitting process, recently passed in the House Natural Resources Committee. Let’s hope Congress has the foresight to make it law.
The U.S. has the resources and capability to become the world leader in the battery and electric vehicle manufacturing race, but only if we shape policy to encourage domestic production. Unless the status quo is changed, the U.S. will continue falling behind in this critical race towards a new future dominated by electric vehicles.
Mark J. Perry (@Mark_J_Perry) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.
