Opinion: So much for the electric vehicle revolution. You cannot make the machines without the metals that power them

Any successful politician is adept at finding the one bit of good news floating in the ocean of despair, then gushing about it to try to drown our worries.

So it is with U.S. President Joe Biden. A few weeks ago, when the war in Ukraine was propelling gasoline and diesel prices ever higher – regular gas hit a record average of US$4.43 a gallon on Friday – he suggested that painful pump prices will speed the transition to electric vehicles (EVs), fear not.

Voila – no more hard decisions about filling your SUV or feeding your kids. “Transforming our economy to run on electric vehicles, powered by clean energy, will mean that no one will have to worry about gas prices,” he said on Twitter. “It will mean tyrants like Putin won’t be able to use fossil fuels as a weapon.”

Nice idea, except for one minor inconvenience: Gas and diesel aren’t the only commodities turning into luxury goods.

Most of the metals that go into EVs and their massive batteries – copper, nickel, cobalt, lithium, plus a variety of rare earth metals – have climbed even faster than pump prices because they are in exceedingly short supply and high demand. Cobalt two years ago went for US$15 a pound; today it’s US$40. Lithium carbonate prices have climbed about 600 per cent in the same period.

The metals’ scarcity means that the endlessly touted EV revolution will almost certainly be delayed, perhaps long delayed, barring the invention of batteries that use far less of these crucial metals, or none at all. Ditto then green revolution in general, for many of these same metals go into wind turbines and solar panels.

In an interview with The Globe and Mail, Guillaume Pitron, the French journalist who wrote the (recently updated) 2018 book The Rare Metals War: The Dark Side of the Energy Transition and Digitalization, said the shortages “will make the energy transition much longer than we believed and hoped.” He added that the EV market “will be led by the countries and companies that are able to secure the supplies of strategic resources. For now, China is leading that race.”

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Already, Tesla boss and co-founder Elon Musk is screaming about excruciating metals prices while quietly jacking up the prices of Tesla cars to make them even less affordable for the average family. According to the Wall Street Journal, the average price of a Tesla is US$52,200, up almost 3 per cent since late 2021.

Last month, Mr. Musk used a tweet to bemoan the “insane” cost of lithium and suggested that “Tesla might actually have to get into mining and refining directly at scale, unless costs improve.”

Mr. Musk has been a lot smarter than most auto executives in protecting supply chains. As far back as 2020, just before the price charts went vertical, he realized that shortages could translate into production and profit-margin squeezes. He negotiated a cobalt supply deal with Glencore, the world’s biggest producer of the metal that is essential for battery production. No more middleman.

General Motors and BMW recently did similar deals with Glencore, through presumably at a much higher price. Tesla is now trying to replicate the process with nickel producers.

In March, Volkswagen announced a joint venture with two Chinese companies to secure nickel and cobalt supplies from Indonesia. The deal thrusts VW into the mining industry, taking a page from the supply chain strategy created by Henry Ford a century ago. Mr. Ford was so obsessed with security of supply that he bought coal mines, timberlands, sawmills, a railroad and a fleet of freighters to make sure iron ore and other materials would reach his factories.

It is not out of the question that Mr. Musk or Tesla will buy, or at least invest in, one of the mining companies that supplies the EV maker with metals. Last year, there were even vague rumours that Mr. Musk, the world’s richest man, was talking about buying Glencore, whose market value is now £60-billion (US$73.48-billion). That’s pocket change for Tesla, which is worth about US$830-billion.

Supply problems, including delays in receiving semiconductors, have extended the wait times for Teslas and rival EVs. This week, Mr. Musk warned that Tesla may stop taking orders because the delays for some models in some markets are already a year or so. “Our issue is not demand, it is production,” he told a Financial Times conference on the future of cars.

A classic economist would say that the best cure for high prices is high prices, which is generally true. Translation (in the metals context): Outrageous prices for copper, nickel, cobalt and lithium will trigger extra production, flooding the market with these metals and bringing their prices down to their historic norm.

Not so in this case. While the in-ground reserves of some metals are genuinely in short supply, such as copper, others, notably lithium, are blessed with generous reserves on several continents. But that’s not the point. The point is that building mines to extract the lithium, and plants to process it, can take five to 10 years. Cobalt mines can taken longer. “The biggest hurdles, in my view, are ecological, social and political – not geological,” Mr. Pitron says.

Every big automaker in the world is ramping up EV production. Forecasts say that tens of millions of these cars will be produced each year by the middle part of this decade. Maybe not. In the United States alone, about 13 lithium-ion plants are in the construction or planning stages – but what is not known is where the lithium will come from. There is only one operating lithium mine in the U.S. European and Japanese carmakers face similar supply constraints.

The EV revolution is beginning to look like an evolution. EVs are coming, but not at pedal-to-the-metal speeds.

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