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Auto Biggies Gear Up to Secure Nickel Supply Amid EV Boom

With batteries being the cornerstone of an electric vehicle’s (EV) performance, which is the most significant metal used in the production EV batteries? The first name that pops up in our head is lithium. While lithium is indeed the most important metal in the EV battery, nickel is not much far behind. With the electrification race getting fiercer by the day, automakers like Ford F, Volkswagen VWAGY, Stellantis STLA, General Motors GM and Tesla TSLA among others are increasing investments in nickel production to secure their supply chain system. These include supply contracts with nickel-producing companies, as well as investments in strategic mining projects.

Shifting Toward Cobalt-Free High Nickel Content Li-ion Batteries

Currently, most EVs are equipped with lithium-ion batteries in which nickel is a critical ingredient. Older lithium-ion batteries used cathodes that had just around 33% of nickel. Lithium-ion batteries were then heavily dependent on cobalt cathodes.

While cobalt provides remarkable energy density, it’s extremely pricey. In an effort to bring down costs and make EVs more affordable, automakers started to reduce their reliance on the metal. Most automakers now opt for cobalt-free lithium-ion batteries. Doing away with cobalt has not just made batteries cheaper but also reduced China's controlling influence on the metal.

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Nickel has now replaced cobalt. Nickel-rich batteries are now preferred for their high energy density and longer range. Automakers are increasing nickel content in cathodes to boost the batteries’ energy density and vehicle range. Most cathodes now contain at least 60% nickel.

EVs Creating a Frenzy for Nickel

While EVs still account for a small share of global vehicle sales, they are poised to lead the transportation space in the coming years. Legacy automakers are revving their up e-mobility game and are setting deadlines to phase out ICE models. Pure-play EV makers are also focused on expanding their vehicle lineup. The e-mobility era is finally here. The global EV market is projected to grow from around 8 million units in 2022 to approximately 40 million units by 2030, at a CAGR of around 22% in the 2022-2030 timeframe, according to a report by MarketsandMarkets.

With batteries serving as the secret sauce for zero-emission vehicles, demand for nickel has been on the rise and the trend will continue. Per Fastmarkets, demand for nickel in EV batteries accounts for around 10% of the total demand but that is set to witness massive growth. Fastmarkets estimates demand for nickel from the battery industry to increase from the 2022 level of around 280,000 tonnes worldwide to 314,000 tonnes in 2023 and 1,389,985 tonnes by 2030. Statista projects global nickel demand for nickel in EV batteries to grow tenfold from 60,000 metric tons in 2018 to some 665,000 tons worldwide by 2025.

Automakers Ramping Investments to Secure the Metal Supply

In a bid to accelerate their EV goals and achieve a greater control over the supply chain, automakers are boosting upstream investments to secure the supply of critical battery metals. While investments in lithium top the charts, automakers are also ramping up spending to ensure a steady supply of nickel.

Yesterday, U.S. legacy automaker Ford announced that it has partnered with mining company PT Vale Indonesia and China-based material processor Zhejiang Huayou to spur nickel production in Indonesia. Ford will be investing in the Pomalaa Block High-Pressure Acid Leaching (HPAL) Project in Indonesia. Vale and Huayou commenced construction of the plant last November and commercial operations at the facility are expected to begin in 2026. The three-way nickel project aims to produce up to 120 kilotons per year of contained nickel in the form of "mixed hydroxide precipitate," which is a lower-cost nickel product used in EV batteries. The partnership supports Ford’s ambitious targets to deliver 2 million EVs by the end of 2026.

Quoting Lisa Drake, Vice President of Ford Model e EV industrialization, “This framework gives Ford direct control to source the nickel we need – in one of the industry’s lowest-cost ways – and allows us to ensure the nickel is mined in line with our company’s sustainability targets, setting the right ESG standards as we scale. Working this way puts Ford in a position to help make EVs more accessible for millions and to do it in a way that helps better protect people and the planet.”

Last year, Ford’s close peer General Motors signed a long-term agreement with Vale to procure nickel supply critical to the North American EV supply chain. Per the deal, Vale would supply battery-grade nickel sulfate for GM’s Ultium battery cathodes, the deliveries of which are targeted to commence in the second half of 2026. Last year, the company also made a strategic investment in Queensland Pacific Metals of Australia, which will provide GM with a secure, cost-competitive and long-term supply of nickel and cobalt from a free-trade agreement partner and will aid its EV production requirements.

In 2022, Germany-based auto giant Volkswagen collaborated with Huayou and Tsingshan for a joint venture in Indonesia to secure nickel and cobalt supplies for its EV goals. The move was part of the company’s massive investment plans to establish a network of battery cell factories and obtain a more direct access to key raw materials required for battery production.

Early this year, Italian-American automaker Stellantis signed an agreement with Terrafame, per which the latter will supply the auto giant with nickel sulphate to be used in EV batteries. Terrafame is set to supply nickel sulphate to Stellantis beginning from 2025 for five years. Stellantis’ CEO Tavares said, “This agreement is part of the key battery material sourcing to fit with our electrified vehicle battery pack needs.” Stellantis targets to become carbon net zero by 2038. Per its Dare Forward 2030 plan, Stellantis aims for 100% of its passenger car sales in Europe to be electric by 2030. It targets 50% of its passenger car sales in the United States to be battery-powered by 2030.

In January 2022, EV king Tesla signed its first nickel supply deal in the United States, selecting Talon Metals Corp's Tamarack mine project in Minnesota in a bid to make the EV battery metal in a sustainable way. Tesla had also signed a nickel supply deal with BHP Group in Australia to secure the supply of nickel from the latter’s Nickel West mine. The EV magnate also signed a $5 billion deal to purchase nickel from two companies in Indonesia.

GM and VWAGY currently carry a Zacks Rank #2 (Buy). While STLA carries a Zacks Rank #3 (Hold), TSLA and F are #4 Ranked (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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