Electric car rush drives rare earths arms race

Even the Ford Mustang is going electric. Photo / Getty Images

Car companies' rush to go all-electric is likely to drive an arms race between manufacturers as they fight to source the exotic materials needed to produce batteries for the eco-friendly vehicles.

In the past fortnight industry giants GM and Ford have detailed plans to stop making cars powered by conventional internal combustion engines over the next decade or so.

Britain's biggest carmaker, Jaguar Land Rover, has also set out similar plans, following on from Volvo, which expects to be fully electric by 2030.

However, these ambitions will exacerbate an existing shortage in rare materials such as graphite, lithium and cobalt used in the production of batteries for electric cars.

Car manufacturers are likely to have to pay more as they compete with each other for the materials needed to fulfil their electric ambitions — potentially pushing up the price of cars without extra capacity.

A forecast from Benchmark Mineral Intelligence's lithium ion battery database predicts that demand for power packs for cars will increase at an annualised rate of 40pc between 2020 and 2025 in Europe alone.

Its research also sets out a scenario where demand for graphite, which is used in anodes for batteries, rises by 30pc annually until 2030, with a supply deficit beginning next year.

Even before the latest round of pledges to go electric by manufacturers, the EU had identified the risks the industry faces.

In a report released in the autumn, it honed in on Europe's lack of resources for materials critical to the production of electric vehicles.

The EU warned that China, which is the biggest supplier of 10 materials needed for electric cars, is also the second biggest source of cobalt and lithium, behind the Democratic Republic of the Congo and Chile, for each of the materials. China is also the world's biggest supplier of graphite.

According to the EU's analysis, titled Critical Raw Materials Resilience: Charting a Path Towards Greater Security and Sustainability, for Europe to meet targets for EV batteries and energy storage even before the latest announcements from the carmakers, supplies of lithium will need to rise almost 20 times and five times for cobalt by 2030.

The report said that the EU needs to "reduce dependency and strengthen diversity and security of supply", warning that "if not addressed, this increase in demand may lead to supply issues".

Analysts at Evercore have previously warned that £100bn needs to be invested in mining facilities to deliver extra production of rare materials needed for battery vehicles.

In a deep dive into the sector even before the latest announcements by carmakers, Evercore said: "Global manufacturers have been quick to trot out 'electrifying' announcements around their future regulatory plans, but few have stopped to ask: will the supply be there?"

- Telegraph Media Group