E-cars: Lithium production is at the beginning of the value chain – it’s as simple as that

Dear Shareholders,

Daimler CEO Dieter Zetsche once said about electromobility: “It’s like turning the ketchup bottle upside down. If you hit it, you know that something will come out at some point. You don’t know when, but when it comes, it really does.” It is exactly at this point we seem to be standing.

A few days ago, Tesla boss Elon Musk presented the new Model Y. He is clearly targeting the mass market. SUVs are particularly popular in the USA and that is exactly the Model Y. The basic version of the car should cost only $39,000 (around 34,000€) and have a range of 370 miles (almost 600 kilometers). The favorable price is possible by the fact that the Model Y uses approximately 75% of the parts which are already used in the Model 3. The production launch of the Model Y is planned for 2020.

The first cars will also roll off the assembly line in the new Shanghai plant next year where Tesla plans to produce 500,000 electric cars annually. Tesla is thus rapidly approaching its stage goal of 1 million cars per year. Tesla is developing from a niche player to a mass manufacturer.

The development at Volkswagen, the world’s largest car manufacturer, is probably even more dramatic. A few days ago, company boss Herbert Diess announced that the company would exclusively use electric cars as an alternative to internal combustion engines. He considers the parallel development of different drive types to be too costly.

The Electric Golf is Coming

Delivery of the compact car of the I.D. family will start as early as next year. The exact name is not yet known. The vehicles of the I.D. Group are based on the Modular Electric Drive System (MEB). The new I.D. mid-range car is expected to cost less than 30,000€ (around $34,000) and thus even less than the Tesla Model 3. VW’s first model, originally designed as an electric car, is to build on the success of the bestselling Golf. Other models based on the MEB are to follow soon – first an SUV and then a minibus.

VW is investing 30€ billion (about $34 billion) in the turn towards electromobility in the coming years. Diess recently increased the number of planned deliveries yet again. So far, VW wanted to sell around 15 million e-cars by 2030; now the yardstick is 22 million units.

The following facts and figures illustrate what VW’s plans mean for the demand for rechargeable batteries and battery cells: In the Nevada desert, Tesla operates its so-called Gigafactory together with Panasonic. It supplies the American Tesla cars with the necessary power storage devices. In concrete terms, this involves a planned annual production of 500,000 vehicles, which is to be achieved by the end of 2019. The Gigafactory, which will be completed in several stages, will one day be the largest building in the world. Today it is already the factory with the highest battery capacity produced. VW alone would need at least seven to eight Gigafactories to equip its electric cars with rechargeable batteries – probably even more! The originally planned demand was 150 gigawatt hours (GWh) per year. Tesla’s Gigafactory currently has a production capacity of around 20 GWh. Meanwhile, however, VW has raised its plans for electric cars.

According to its own figures, Volkswagen has already secured the batteries for at least 15 million electric cars. Suppliers include SK Innovation, LG Chem, Samsung and CATL. The Chinese will also supply the Tesla plant in Shanghai. Now it is getting exciting and the circle is closing. The market is discussing that CATL has so far only secured a quarter of the lithium it needs for all its delivery commitments. Bottlenecks seem to be inevitable.

New Procurement Strategies

The big and established car companies have not yet changed their thinking. But that is exactly what will inevitably happen: The supply chain does not start with batteries or battery cells, but with the raw materials needed for their production – and in battery quality. This includes lithium, in particular, as Rock Tech intends to supply in the foreseeable future.