Carmakers will have to invest in the mining sector to guarantee supplies of materials needed to make batteries and keep costs under control if the drive for electric vehicles is to be sustained.
The claim comes from analysts at Evercore ISI, whose research warns of shortages in the battery materials needed by car companies racing to offer more environmentally-friendly electric vehicles, which will help them meet emissions controls.
Not being able to source enough rare metals and minerals may force carmakers to battle for supplies, keeping costs high and preventing electric vehicles preventing electric vehicles from going mass market.
"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?" said Arndt Ellinghorst, car industry analyst at Evercore.
He calculates that new demand – almost entirely from the car industry – will raise the total global requirement for batteries from all industries from the current 151 gigawatt hours (GWh) a year to 933GWh a year by 2025.
By comparison, electric car company Tesla's Gigafactory 1 in Nevada has a theoretical maximum production output of 35GWh a year, but is running at about two-thirds of that.
Evercore's research suggests that in 2023, there will be a 6,000-ton annual shortfall in cobalt, rising to about 92,000 tons in 2025 as demand for the battery material rises.
Another battery material, lithium, is likely to see a 650,000-ton shortfall against a 1.9m-ton demand by 2028.
"With expectations that 10pc of the car market will be battery by 2023, there will inevitably be a shortage of raw materials unless there is US$50bn-plus of investment in copper and nickel projects with cobalt as a by-product," Mr Ellinghorst said.
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When other battery materials are included, Evercore believes £100bn (NZ$191 billion) needs to be invested in mining to produce sufficient supplies. Without this extra cash, companies mining battery materials will sell to the highest-margin customers.
One solution is for car companies to use their scale and invest at the source of the materials, stopping them being pushed out of the competition for scarce minerals.
"Investing in mining can also bring savings by eliminating the margins earned at those facilities," said Mr Ellinghorst.
This could bring other benefits too. Many of the materials used in batteries are mined in unstable regimes, often with questions about how they are produced. Being involved at the mining level would ease concerns about ethical sourcing of supplies.
With internal combustion engines, car companies use materials that are generally easy to source. This has meant they can rely on their networks of suppliers to drive down costs by a few percentage points each year as they compete for contracts.
However, with a limited number of suppliers of battery materials and increasing competition for them, potentially from other industries, carmakers are at the mercy of market forces. They could also face production halts if their supplier has problems as there may be no alternative sources.
- Telegraph Media Group