The viability of the electric vehicle (EV) as an alternative to the internal combustion engine is helping pave the way toward a decarbonized future, and it’s creating investment opportunities along with it—particularly, commodities.
The International Energy Agency recently reported that 6.6 million EVs were sold worldwide in 2021—more than double the number sold the previous year—despite supply chain issues caused by the COVID-19 pandemic.1 In the U.S., the Biden administration set a goal of 50% EV adoption by 2030.2
As EV production surges, so will the need for lithium to produce batteries. Credit Suisse forecasts that lithium demand will outpace supply in 2022 and beyond,3 making it an extremely valuable commodity. Increased battery sizes or changes in associated chemistries could further accelerate demand in the short term, while long-term drivers could include increased regulation, improved infrastructure development, and reduced battery costs.
Truist analysts believe lithium is best positioned for investment, given current elevated demand applications. Additionally, lithium is poised to see increased demand from non-EV sources.
Lithium isn’t the only element that powers EVs. Many of today’s lithium-ion batteries are heavily dependent on nickel for improved battery densities and reduced costs. The ability to travel farther at a friendlier price point will be critical in EV adoption. Industry analysts expect substantial EV-driven nickel demand in the coming years, with many predicting the industry to account for 35% of total demand by 2030.4
Copper could also experience a supply crunch. EVs easily use twice as much copper compared with conventional autos, requiring it for electric motors, wiring, inverters, and batteries. Additionally, copper is used in charging stations, which will need an expanded infrastructure due to increased EV sales.
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1 “Electric cars fend off supply challenges to more than double global sales,” International Energy Agency, January 30, 2022.
2 “Fact Sheet: The Biden-Harris Electric Vehicle Charging Action Plan,” Whitehouse.gov, December 13, 2021.
3 “Factbox: World faces shortage of lithium for electric vehicles,” Reuters, January 21, 2022.
4 “Electric vehicles and the nickel supply conundrum: Opportunities and challenges ahead,” S&P Global, December 31, 2021.