The Auto and Mining Sectors are Getting Cosier
The mining sector is under a microscope. But this is nothing new. The sector powers much of the world, yet there have always been labor and environmental concerns attached to their work. It’s the nature of the business, but in 2023, in addition to mining, the auto industry is making its way under the same watchful lens. You can chalk this up to lithium and similar minerals that go into the fabrication of batteries.
Lithium is a hot commodity. As electric vehicles (EVs) continue to develop, batteries will need more and more of the “white gold” to keep up with demand. The country with the largest reserves is Chile, while Australia, Argentina, and China round out the top 4. Auto companies have historically not taken an economic stake in their suppliers. There are always instances of a company buying a supplier because it made more sense long-term to manage the production of that product in-house. But for the most part, auto suppliers are the extended family of the principal automaker(s).
However, with supply chains under pressure, many automakers are seeking ways to avoid current and foreseeable shortages of key materials and components. A clear example of this was the squeeze on semiconductors that continues today. The result has been closer relationships with semiconductor chip manufacturers and automakers.
The same is now occurring with lithium and similar minerals needed for EV batteries. For example, General Motors was in discussions with Vale SA, a Brazilian mining company that processes nickel. Just last year Tesla began early talks with Glencore PLC about purchasing a stake in the company, one of the world’s leaders in cobalt production. But lithium is perhaps the most sought-after when it comes to battery inputs, and news out of Europe is Volvo Car AB has been engaged in advanced talks with some of the biggest lithium mining players as well as the factories that process lithium.
Close alignments with mining companies do not come cheap. There is increased pressure on all firms, especially with mining operations that have had issues with labor or environmental conditions. Yet, even for responsible firms, simply operating in mining can bring unfair judgments. Tesla recently ended their talks with Glencore citing potential reputational risks that could arrive via a direct relationship with mining. Just the potential alone led them to scrap the idea.
Volvo is attempting to become fully electric by 2030. This is going to be challenging considering that just 11% of total 2022 sales were EVs. In addition to flirting with a stake in mining, Volvo has already teamed up with Swedish battery maker Northvolt AB. By the time their joint battery factory is completed, it will be one of the biggest in all of Europe.
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