EU countries this week okayed proposed laws to combat climate change including one requiring new cars sold in the EU to emit zero CO2 (carbon dioxide) from 2035.
That would make it impossible to sell internal-combustion engine cars from that date and force a more rapid transition by many companies which still have sales of conventionally powered vehicles in their forecasts up to 2040-50.
The European Commission first proposed the package a year ago, aimed at slashing carbon emissions this decade and the deal this week bring closer the chances of the changes becoming EU law.
And there lies the challenge for car companies, battery makers and others – and also underlines the shallowness of the gloom and doom about the demand for battery minerals – especially lithium – from the likes of Goldman Sachs.
Carmakers and battery companies are going to have to pull their fingers out and get cracking – effectively they have 12 years to transition from ICE (internal combustion powered engines) to EVs in their various forms.
According to VW, Europe’s biggest carmaker, the challenge won’t be making EVs, it will be making/recycling/ creating enough batteries (of sufficient power and reliability) to power the fleet.
“It’s a challenging goal. We think it’s doable,” VW Chief Financial Officer Arno Antlitz told Reuters in an interview this week.
“The most challenging topic is not ramping up the car plants. The most challenging topic will be ramping up the battery supply chain.”
VW has said it will stop selling combustion engine cars in the region by the target date.
The likes of Tesla, Polestar/Volvo/Geely, BYD, Nio and other EV makers won’t have any trouble either.
It could be carmakers like Toyota, Nissan and Samsung that struggle to meet the target because of their continuing belief in hybrid technology for EVs, rather than battery-powered EVs alone.
Sourcing enough supplies of lithium, nickel, manganese, copper and cobalt, not to mention rare earths and sufficient manufacturing capabilities look like the two major problems to be overcome.
Stellantis (Fiat, Chrysler, Peugeot) CEO Carlos Tavares said last month that he expects a shortage of EV batteries will hit the auto industry in 2024-2025 as manufacturers try to ramp up electric vehicle sales while still building new battery factories.
The lure of hybrids saw some countries lobby for delays to outright ban until 2040, but a deal saw the 2035 deadline adopted with a review of hybrid capabilities in 2026.
Reuters says the 2035 proposal is designed so that in theory, any type of car technology such as hybrids or cars running on sustainable fuels could comply with it, as long as it means the car has no carbon dioxide emissions.
The 2026 review will examine what technological advances have been made in hybrid vehicle technologies to see if they can comply with the 2035 goal.
It sounds like an attempt to create an out for the likes of Toyota which continues to be accused of dragging its feet on an all-EV fleet – it remains committed to hybrids as well as EVs and many analysts reckon the Japanese giant will be pushing hybrids for years to come, especially in markets where it has influence, such as China and other parts of Asia and Africa.
But the leading companies such as BYD, Nio and Tesla are all EV (battery powered) and the feeling is the Communist Party government will push down this route and not support hybrids because it seems the latter as weakening the country’s dominance in batteries and allied technologies.
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Meanwhile, in a move that will boost interest in lithium from Australia and other regions, California will impose a flat tax on production of the key battery metal from the huge untapped Salton Sea.
California’s Democrat Party government and Governor, Gavin Newsom justify the tax as a way of paying for environmental remediation projects in the area east of Los Angeles.
Opponents say the government is trying to tax a gold goose before it has been born.
Governor Gavin Newsom approved the tax as part of a must-pass state budget on Thursday.
The state’s legislature had signed off on the new tax during deliberations on Wednesday night.
The tax is structured as a flat-rate per tonne impost and will go into effect in January, 2023. It will be reviewed every year, and state officials have agreed to study potentially switching to a percentage-based tax.
California’s tax is aimed at plans to mine the huge lithium reserves in the Salton Sea region, east of Los Angles, an area heavily damaged in the past century by years of heavy pesticide use by farmers.
Funds generated from the tax are earmarked in part to cleanup of the area but as yet no mining projects are happening. There are a number of gepothermal power plants operating in the area.
The Salton Sea brine deposits are easier to process using a geothermal brine process more environmentally friendly than open-pit mines (as in Australia) and brine evaporation ponds (used in Chile and Argentina).
Two of the three lithium companies working around the Salton Sea have warned the tax will scare off investors and customers.
Both said they may leave the state for lithium-rich brine deposits in Utah or Arkansas.
The privately-held Controlled Thermal Resources Ltd said the tax would force it to miss deadlines to deliver lithium to General Motors Co by 2024 and Stellantis NV by 2025.
EnergySource Minerals LLC, also privately held, said it halted discussions with potential financiers and an automaker.
“Supporting a tax that ensures lithium imports from China are less expensive for auto manufacturers to secure will devastate this promising Californian industry before it has begun,” said Rod Colwell, Controlled Thermal’s CEO said in a statement.
Energy Source, which owns one of the 11 geothermal plants around the Salton Sea, plans to produce lithium by April of 2024.
Berkshire Hathaway, which owns the other 10 geothermal plants under the subsidiary Cal Energy, plans to produce lithium on a mass scale by 2027.
The Salton Sea alone has the estimated potential to provide 40% of the lithium used by the world, which would make it the largest source in the world.
