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An EV charging port.
Alex Wong/Getty Images
Reports that President Joe Biden could invoke the Defense Production Act to strengthen the United States electric vehicle supply chain boost the stocks of material suppliers. But the United States is not the only government seeking to revive activity.
The act is what President Donald Trump used to do increase the supply of masks in the United States in the early days of the Covid-19 pandemic. He gives the federal government the power to order private companies to give priority to government orders, among other powers. The White House did not immediately respond to a request for comment.
Investors, however, seem convinced that something is afoot. Stock in a magnetic materials company
PM materials
(MP) rose 3.2% on Wednesday, while the EV battery materials recycler
Li Cycle
(LICY) gained 7%. And stocks of small-cap lithium miners
Piedmont Lithium
(PLL) and
Lithium Americas
(LAC) ended up 1.8% and 12%, respectively, while shares of
Albemarle
(ALB), a larger miner, gained 0.3%.
the
and
ended down 0.2% and 0.6%, respectively.
Focusing on the supply chain would represent a new angle for the administration in its support for electric vehicles. Last August, President presented his vision that 50% of new cars sold in America will be fully electric by the end of the decade.
Traditional car manufacturers, including
Ford engine
(F) and
General Engines
(GM) responded to this vision by announcing spending billions for the development of new electric vehicle platforms, vehicle assembly capacity and battery manufacturing plants.
You’re here
(TSLA), of course, continues to invest in the United States, but it has made no similar announcements. The majority of all Tesla spending has historically been on electric vehicles, although the company is also developing solar roofs and battery storage products.
All of the spending announcements have answered the question of where the cars and batteries needed to meet Biden’s goal will come from. Wednesday’s reports could help determine how manufacturers will get what they need to power those battery factories.
The issue has become increasingly important since material prices began to soar earlier this year. The cost of one basket of metals used in batteries that Barrons tracks is up more than 60% since the start of the year, potentially adding $2,000 to the price of a typical electric vehicle.
The reasons for this surge are varied. Lithium demand is growing faster than production, so benchmark lithium prices are up nearly 80% year-to-date. Nickel prices have risen more than 50% since the start of the year, perhaps mainly due to sanctions against Russia following its invasion of Ukraine. Russia is a major nickel producer.
China is another longer-term reason for the government to focus on sourcing materials for electric vehicles. The country, the world’s largest market for electric cars, is the leading producer and processor of materials for electric vehicles. Sourcing materials from China adds cost and complexity for U.S. automakers as they try to ramp up production of electric vehicles over the next few years.
Biden wants the materials to come from domestic sources. He is not the only government official who wants to strengthen its national electric vehicle industry.
Vic FedeliOntario Minister of Economic Development, Job Creation and Trade, Barrons all the steps his provincial government has taken to encourage the production of batteries and materials for electric vehicles. On the list, investing in business parks ready for new businesses, reducing taxes, lowering the cost of electricity for industrial users and reducing the number of steps required to obtain permission to build a facility .
“Ontario is the only place a company can get everything they need to build an EV,” says Fedeli. Ontario has an automobile manufacturing sector as well as nickel mines. He thinks the province has enough rare earth minerals and other materials to support that claim.
He says the changes made by his government are helpful. Last week Chrysler’s parent
Stellantide
(STLA) and drum partner
LG Chemistry
(051910. Korea) announcement plans to invest $5 billion in new battery manufacturing capacity in Windsor, Ontario, which is across the Detroit River from the US city. The plant will have an annual battery production capacity of approximately 45 gigawatts. That, roughly speaking, is enough to make more than 500,000 electric vehicles a year.
In recent quarters, Stellantis, GM,
Ford
,
and Tesla announced plans for about 400 gigawatts of new battery production capacity in North America. Further announcements are expected. Government policies will be critical where the plants are built.
Write to Al Root at [email protected]
