Lithium is known as "The New White Gold" because its price has increased more than 10 times since the beginning of 2021. It is considered as an essential part of the production of electric vehicle batteries. However, the rapid increase in prices directly affects the cost of the electric vehicle industry. Many people predict that operators will increase the selling price of EVs, but this is hard to occur because the industry is so competitive. Therefore, companies should offer the customers more promotions in order to attract more customers. On the other hand, this situation for investors is a good investment opportunity.

Understanding Lithium

Lithium is the malleable and lightest metal in the periodic table where it can receive and release electrical energy on its own. It is also used in medicine for bipolar disorder, ceramics, and nuclear weapons. Now, it is a key component in the manufacturing of computers, mobile phones, electronic devices and electric cars.

Lithium Shortages

From the above information, it's clear that the electric vehicle industry is growing at a very rapid speed. For example, a leader like Tesla is planning to increase the production of 2 million vehicles. In addition, BYD, which is about to dominate the EV market instead of Tesla, has added another 1.2 million vehicles as well.

However, the growing number of electric vehicles does not include battery-powered hybrid vehicles and other products from smaller companies. It can be concluded that the demand for lithium will increase in the future. On the other hand, the supply of lithium ore is not rising in line with demand, and it takes too many steps to process lithium into battery form. Therefore, Lithium became a mineral that began to be scarce. However, there are only a few countries in the world that have raw materials and equipment for lithium production. Therefore, many large companies in the electric vehicle industry scramble to buy lithium, causing the price of lithium to increase.

Which Group Loses the Benefit?

The group that will lose out is the electric car industry, as it has higher costs but lower profits, which weighs on share prices. Nowadays, you will see companies increasingly monopolizing the upstream companies that produce lithium. For example, BYD has invested in African companies and Tesla is applying for permission to build its own lithium plant.

Investment Trends

In terms of long-term demand, the electric vehicle industry has not shown a downward trend in growth despite rising costs. Analysts believe that by 2030, there will be more than 40 million electric vehicles, and that the EV industry will grow by at least 25% each year. To produce such a large quantity of electric vehicles, however, 5 to 6 times more lithium is required. Elon Musk has recently come out to encourage investors to invest in companies that mine lithium ore. In addition, the support of government policies on clean energy in each country is another important factor confirming that this trend will continue for a long time and will need to rely on batteries.

In addition, the share price of lithium mines such as AKE, IGO, MIN and PLS in the past year has increased 10 times. Analysts predict that if the stock price has the same P/E but the price rises, it will be a good opportunity for long-term investment. However, you should do your research as there are many lithium mine companies that do not have licenses. Thus, we recommend investing in reputable companies.

Conclusion

Lithium is in high demand in the electric vehicle industry. It also has sodium, which is similar to lithium, but it doesn't have a supply chain to support it. However, it may be developed in the future. Because of this, you should regularly make adjustments to your investment plan.

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