The Global Race for Critical Minerals in EV Batteries

The transition to electric vehicles is driving massive demand for raw materials. To build the millions of cars promised by major automakers, companies must secure reliable sources of lithium and cobalt. This challenge has forced both car manufacturers and mining giants to radically change their business strategies.

The High Stakes of the Mineral Rush

Automakers used to focus entirely on designing cars and assembling parts. Today, they are deeply involved in the dirt business. A standard electric vehicle battery requires roughly 8 kilograms of lithium and 14 kilograms of cobalt. Securing these specific minerals is currently the hardest part of building an electric vehicle.

Mining companies like Albemarle, SQM, and Glencore are ramping up their production targets. However, opening a new mine can take up to ten years from initial discovery to commercial production. Because demand is expected to triple over the next decade, automotive companies can no longer rely on the open market to buy their materials. They must take matters into their own hands.

Direct Equity Investments and Joint Ventures

The most aggressive corporate mining strategy involves carmakers skipping the middleman. Automakers are buying direct equity stakes in mining operations to guarantee their spot at the front of the line.

In early 2023, General Motors invested $650 million in Lithium Americas. This historic deal gives GM exclusive access to the first phase of lithium production at Thacker Pass in Nevada. Thacker Pass is the largest known lithium resource in the United States.

Ford is using a similar strategy abroad. The company announced a $4.5 billion joint venture with PT Vale Indonesia and China’s Huayou Cobalt. This project will build a high-pressure acid leaching plant in Indonesia to process nickel and cobalt, giving Ford direct control over a massive overseas supply line.

Securing Supply Through Offtake Agreements

If a car company does not want to buy a mine, they use an offtake agreement. An offtake agreement is a legally binding contract to buy a specific amount of a mine’s future production at a pre-negotiated price structure.

Mining startups desperately need these contracts. A startup can take an offtake agreement to a bank to prove they have a guaranteed customer, which helps them secure the massive loans required to build the mine.

Tesla relies heavily on this strategy. The electric vehicle giant has signed massive offtake agreements with Australian miners like Piedmont Lithium and global chemical giants like Albemarle. By signing these deals years in advance, Tesla shields itself from future material shortages.

Navigating the Cobalt Challenge

Cobalt presents a unique set of challenges for corporate strategists. Over 70% of the world’s cobalt comes from the Democratic Republic of Congo (DRC). The region is associated with severe human rights abuses and unregulated artisanal mining operations.

Corporate strategies to handle cobalt are twofold:

• Strict Auditing: Companies like BMW and Tesla sign strict, audited contracts with established, mechanized mining giants like Glencore. This ensures their cobalt comes from industrial operations rather than child labor.
• Engineering It Out: The most effective strategy is avoidance. Automakers are heavily investing in Lithium Iron Phosphate (LFP) batteries. LFP batteries use zero cobalt and zero nickel. Ford, Tesla, and Rivian are now using LFP battery packs for their standard-range vehicles, significantly reducing their reliance on the DRC.

The Power of Vertical Integration

Chinese companies currently lead the world in raw material processing and vertical integration. BYD, the largest electric vehicle maker in China, does not just assemble cars. The company manufactures its own batteries and owns direct stakes in lithium mines in Africa and South America.

This model allows BYD to control costs at every single step. In late 2022, the spot price of lithium carbonate hit an all-time high of roughly $80,000 per ton before crashing below $15,000 in early 2024. Highly integrated companies like BYD are protected from this extreme price volatility because they mine their own supply. Western companies are actively trying to replicate this closed-loop success.

Urban Mining and Battery Recycling

Because traditional mining is incredibly slow and environmentally taxing, corporate strategy is shifting toward recycling. Industry experts often refer to this as urban mining.

Redwood Materials, a recycling company founded by former Tesla executive JB Straubel, is leading this charge in the United States. Redwood has partnered with Ford, Toyota, and Volkswagen to process their scrap and end-of-life batteries. The company can recover up to 95% of the critical metals (including lithium, cobalt, and copper) from old batteries. They then process these metals and sell them right back to the automakers, creating a sustainable, localized supply chain.

Government Policy as a Strategic Driver

Corporate mining strategies are completely shaped by government policy. In the United States, the Inflation Reduction Act offers a $7,500 tax credit for buyers of new electric vehicles.

However, a vehicle only qualifies for the full credit if a certain percentage of its battery minerals are extracted or processed in the US or in a country that has a free trade agreement with the US. This specific rule forces automakers to abandon cheap Chinese processing facilities. As a direct result, companies are aggressively funding new lithium and cobalt projects in friendly nations like Canada, Australia, and Chile to ensure their cars qualify for the vital tax credits.

Frequently Asked Questions

Why is lithium called “white gold”? Lithium is often called white gold because of its silvery-white appearance and its high market value. It is the lightest metal on earth and is entirely essential for storing energy in modern rechargeable batteries.

Do all electric vehicles use cobalt? No. While traditional Nickel Manganese Cobalt (NMC) batteries require it, many automakers are switching to Lithium Iron Phosphate (LFP) batteries. LFP batteries are slightly heavier and hold a bit less energy, but they do not use any cobalt or nickel.

Who produces the most lithium in the world? Australia is the world’s top producer of mined lithium, usually extracted from hard rock called spodumene. Chile is the second-largest producer, where lithium is extracted from massive underground brine pools in the Atacama Desert.

Can we just recycle old batteries instead of mining? Recycling is highly effective, but there are simply not enough old electric vehicles on the road yet to meet the current demand for new batteries. New mining operations will be absolutely necessary for at least the next two decades until a large wave of first-generation EVs reach the end of their lifespan.