Why is GM investing in lithium mining?
The company, known for creating a vast amount of cars, is planning on building a lot more electric vehicles. The raw material lithium, is used in batteries and other parts of these vehicles and a major production problem if there is not enough.
The investment from General Motors is going to a company called Lithium Americas and will be around $650 million in total. The goal of this investment, is to start up a lithium mine in Nevada, United States.
This investment, would mean that GM will have enough lithium to produce its cars on time and create a huge revenue stream that they believe will over $50 billion.
Is this a smart investment into lithium mining?
To keep the investment on own soil, means that the company can keep the supply chain close. This has a huge impact on reliability and speed.
By having this investment into lithium now, which is the largest investment currently made into lithium mining, the company ensures a top spot in the lithium pool.
Because of the increase in electric vehicles, plans to build them and the other uses of lithium for the future, this investment would mean a secure long-term plan by General Motors.
What will happen to the price of lithium?
As has been predicted by many investors, the price of lithium will go up in the long-term. It is a future-proof raw material that will be used more and more in all sorts of technologies.
The investment of GM into a new mine, would mean that supply will increase in the United States. This can have a positive impact, depending on the production capacity of Lithium Americas.
If the company decides to produce fast and flood the market, the price of lithium will be going down.
This, however, also means that there would be more products created and sold, which can have a positive impact on the price of derived products of lithium.
The expectation is not that the market will be flooded, though. Lithium is a scarce raw material and is needed in the long run to create, in GM’s case, electric vehicles.
The strategy of both companies would therefore be to extend the duration of the mine for as long as possible, without creating any hiccups in supply for the products created.
What this would mean for the price of delivery, is that they will drive up demand and by that logic the price of lithium as well. This would create a higher profit on the company’s side and a higher profit for investors.
Should I invest in the lithium price or electric vehicles?
The investment into the raw material lithium or into companies that create electric vehicles is one of own choosing.
The raw material lithium can create more than just batteries for electric vehicles. It is a versatile substance of which the price can be influenced by many factors.
The electric vehicle market is more focused. It is therefore easier to track, but it also means that if a market segment fails, the price of the investment will plummet faster than with an investment into the raw material.
The right investment for you, depends on the strategy that you would like to take. So make sure you do your research and make an informed decision.