AUTOMOTIVE INSIGHT: Lithium Prices are set to Soar

September 11th, 2008 at 2:18pm

As heard on
WWJ Newsradio 950

Listen to this story:

LithiumJust like every other commodity out there, the lithium that goes into making advanced batteries for plug-ins and electric cars, is going to see a big price hike.

The global demand for lithium is about to go up dramatically because car companies need it to make advanced batteries. China is buying up all the lithium it can, and it’s developing its own sources, which are mainly located in Tibet. Hey, maybe that’s another reason why China is so keen on keeping Tibet.

Anyway, lithium is kind of like oil shale. There’s a lot of it out there, but it’s not easy or cheap to get at. As a result, global supplies are tight and prices could be ready to start climbing a lot.

So far, lithium is not traded on any commodity exchange, but plans are in place to do just that. And you watch, once lithium starts to get traded like any other commodity, and once investors realize how much the auto industry is going to need it, prices have no where to go but up.

2 Comments to “AUTOMOTIVE INSIGHT: Lithium Prices are set to Soar”

  1. Tom Martin Says:

    I agree with your prediction in regards to lithium price.

    I also have two related pet peeves.

    1. A car that gets 25 mpg, burns 4,000 gallons of fuel in 100K miles. At today’s prices that’s about $16K. Probably 50-60% of that goes overseas and leaves the country–$8-10K.

    A person who buys a Japanese built Prius for $30K, probably sends $20K overseas plus another $4-5K for fuel.

    So a Prius sends money overseas faster than a U.S. built midsize car.

    2. And the U.S. has used millions of tax dollars to encourage hybrids sales to further increase the flow of dollars outside the US since Honda and Toyota sell the most hybrids. And both Presidential candidates are talking increasing the subsidy to hyrid cars. (And why is there a subsity for vehicles which have about a 6 month waiting list?)

    If there is a subsidy, it should only be for U.S. built cars. This exclusion should also be for U.S. cars built in Canada and Mexico.

  2. KJ Says:

    @tom

    To understand what is more expensive you need to look at the NPV of both the suggestions you have given.
    Suggestion 1) Considering that when buying a car… a modest $4k leaves the country.
    And then each year on an average $9k leaves due to gasoline prices.
    Taking a modeast 5% rate of return and calculating it for 10 years gives us an
    NPV=($73495.61)<—-money goes abroad

    Suggestion 2) Considering $20k leaves abroad and then $4.5k leaves due to gas.
    taking the same variables. rate=5% and 10 yr lifetime.
    NPV=($64747.8)<—–money goes abroad

    So prius hybrid is a pure win….
    Also the US. govt wont have to dependent on the gulf countries and would also be safe from any volatilities in gas prices.
    In the future if other substitutes for gas are not found then US will be shielded by the policy undertaken now.

    regards
    karan