Electric car skeptics, heed this statistic: UK pure electric vehicles (EVs) sales surged almost 80% in May 2017. The commodities that power EVs appear in demand.
Okay, the EV numbers are modest, to say the least: 926 compared to 517 sold in May 2016. By comparison a total of 186,265 cars were registered in May, according to UK industry body the Society of Motor Manufacturers and Traders.
But there’s no doubting the trend. These are transformative numbers. In the US electric vehicle maker Tesla – valued at $51bn, which is more than Ford or GM – is fast-tracking its new Model 3 mass-market car, beefing up production and sales targets (while warning, also, on debt and capital spending).
Which commodities are set to gain from the EV surge?
Capital talked to industry experts who pinpointed three metals – lithium, nickel and cobalt. All are increasingly used in EV production and while their price trajectories considerably, all may bear examination longer term.
- Lithium – highly versatile because it stores energy well. Lithium’s price tripled in 2016 “but there’s also now a big supply response coming,” said a CRU Group commodities analyst. “There’s a lot of new projects on their way towards the end of this year and next year that will put the market back towards balance in our view and lithium prices will likely come down. Not as far [down] as they were but will still be a fall from current levels because supply-demand balance will be better.”
- Nickel – a widely used commodity mostly used in stainless steel production. But it has a lot of electric potential also. “Its battery application has been fairly minimal in the past,” says CRU Group, “but the part of it that goes into batteries is growing very, very fast. Fundamentally there’s a lot of nickel that could go into battery rather than stainless steel.” Nickel was in a bear market for several years until recently but Tesla is using nickel-cobalt chemistry in its vehicles. However Nickel’s price has fluctuated markedly recently.
- Cobalt – this metal is already in your mobile phone battery as well as your laptop. “It has got very expensive since January because Cobalt is a by-product and there’s little elasticity in the supply of it,” says CRU Group. “Whereas in lithium you have the supply response, with cobalt you need to be able to a nickel or cobalt mine up and running.” Since the start of the year Cobalt’s price per tonne has soared from $35,000 to more than $55,000.
How do you buy into metals?
You could buy into a metals fund. Some, such as the Baring Global Resources Fund, increasingly target assets used in EVs. While this fund was up almost 40% in 2016, it’s 3.7% down in 2017 so far. Exchange Traded Funds (ETFs) are also used. You can check the prices of most commodities at the London Metals Exchange, which offers a range of historical price information tools.
Bear in mind EV technology is changing fast, which may alter the mix and longer-term metals performance. Many metals saw their prices hard hit after the financial crisis so timing – commodities are highly cyclical – is important. Drip-feeding money in over time is often a better approach than investing a lump sum at once.
Four EV trends
- Asian markets are increasing EV adoption to fight massive, choking air pollution
- Norway and the Netherlands intend to phase out all internal combustion engine (ICE) cars by 2025
- Battery costs are falling – research from Bloomberg New Energy Finance claims tumbling costs means EVs could be cheaper to buy than a conventional ICE vehicle by 2025
- ICE regulations, particularly over particulates, are getting tougher, fast. Producing ICE vehicles will become more expensive and less profitable longer term
Four EV financial facts
- $1trn – the value of the EV market IDTechEx predicts will be worth by 2027
- £20-£30,000 – Tesla, VW, Nissan and other makers all plan to sell large number of EVs in this price range in the future. Some are even on sale now
- £18m – the amount TfL is spending on preparing London for new electric black cabs. From 1 January 2018 all new London black cabs must be battery-powered electric models
- £8,000 – the estimated price of a new two-seater micro EV, the Eli Zero, due for a UK lunch in January 2018