Electric mobility is charged and accelerating its disruptive march into the automotive landscape. Global EV sales reached 3 million in 2020, or 4.3% of all cars sold globally. And growth for this year signals a similar trajectory with mid-year EV market share at 8% globally. Conversely, traditional combustion engines continue their steady descent in markets worldwide. In Europe, EVs even outsold diesel vehicles for the first time in the third quarter (18.9% vs 17.6%).
Electric vehicles’ global popularity and penetration rates have been helped by decisive regulatory actions. In response to urban pollution and climate change, governments in major economies worldwide have introduced emission limits for carbon and other greenhouse gases. Europe has seen the greatest tightening and has also witnessed the fastest EV uptake. Since 2009, the EU has phased in increasingly stringent CO2 emission targets inducing some Member States to imposed outright bans on petrol/diesel vehicles over next 10-30 years.
Advances in lithium-ion battery technology have also been crucial in bringing EV costs down, paving the way for consumer adoption and increased market penetration. For this reason, most of today’s battery electric vehicles (BEVs) are powered by lithium-ion chemistry. Yet costs are not the only factor in lithium’s ascent. Its status as the “battery-of-choice” in EV markets stems from its superior performance across a mix of key variables which include high energy density (which translates to high electric power capacity), light weight, low volume constraints, operational safety, and scalable manufacturing.
Moreover, lithium’s continued battery market dominance may not be limited to mobility. The same performance characteristics that make lithium-ion batteries popular for cars are also making them a viable option for much wider energy storage applications that can help electrify and decarbonize other industries beyond transportation.
Advances in lithium-ion battery technology have been crucial in bringing EV costs down
Lithium (Li) is not without shortcomings. Supply issues, coupled with consumer “range anxiety” have driven the search for alternative solutions. Lithium’s high energy density mean Li-ion batteries (LIB) will remain unrivaled in EV markets in the years to come. As a result, battery research efforts have been centered not on replacing Li but rather on pairing it with other cathode metals like nickel (Ni), aluminum (Al), manganese (Mn) and iron (Fe) to enhance performance factors. For example, increasing LIB nickel content further increases energy density and improves driving ranges. Yet drawbacks are also present: high-nickel cathode chemistries pose challenges in terms of temperature stability, increasing the risk of fire and raising safety concerns. In addition, they are more costly to produce compared to other LIB alternatives. Accelerating advances in R&D make it difficult to predict which cathode chemistries will prevail. What is clear is lithium’s continued dominance within battery raw materials.
In contrast to lithium, a metal that EV markets would like to eliminate is cobalt. Cobalt functions to stabilize battery performance. Ironically however, ESG risks surrounding its sourcing, extraction and production threaten to destabilize EV supply chains. Most of the world’s cobalt is sourced from the Democratic Republic of Congo, a politically unstable country, with chronic governance issues and a history of human rights abuses. Moreover, cobalt mining is dangerous to human health and environmentally polluting, further increasing the social and environmental costs associated with its production. Reducing reliance on cobalt is also helping drive research to find raw materials that stabilize battery performance without the associated ESG and supply chain risks.
Cheaper production and lower material risks largely explain why less technologically sophisticated batteries are experiencing a significant surge. Lithium iron phosphate (LFP) batteries are on the rise in China and favored by the likes of Tesla, which recently announced their use in standard-range models. LFPs are heavier and have a lower energy density, resulting in shorter driving ranges. However, they are cheaper, safer and have a long shelf life. In addition, given LFPs contain less lithium and zero cobalt, they have less exposure to ESG and supply chain risks.
Present focus of much battery-related research is on eliminating cobalt from EV supply chains
Solid-state batteries are considered the next-generation of cutting-edge battery technology that promise to provide more energy power, better safety, increase durability and longer life compared to current battery technologies that are liquid-based. But even here, lithium is making its mark, dramatically enhancing solid-state battery performance with no additional weight or loss of space. Positive performance results are driving partnerships between car and Li-ion battery manufacturers to further develop solid-state technologies for the coming decades.
Lithium demand is expected to rapidly accelerate to over 2 million tons, creating significant structural shifts through 2030 and beyond. EV batteries account for 30% of annual lithium demand and within ten years will exceed 80%. Demand increases should also drive investments to increase supplies, leading many to suggest the commoditization of lithium and falling prices as more supplies become available.
However, although lithium resources in the Earth’s crust may be abundant, they are buried within other mineral ores making them difficult to mine. Extraction and refinement come at great complexity and cost. Future investments to secure upstream supplies will only be undertaken if prices justify the expense. Moreover, extreme variations in quality grades to meet industry specifications should further mitigate the risk of commoditization and price declines.
Despite initial skepticism, the electrification of the transportation sector is firmly fixed and steadily accelerating as EVs continue their disruption of the automotive industry.
Strong demand, limited supplies, superior performance and increasing visibility as a critical element in transportation’s transition to a low-carbon economy mean companies across the lithium value chain are ideally positioned to benefit from future trends in mobility electrification.
The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).
This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.
This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.