Stellantis will invest 50 million euros in Australian start-up Vulcan Energy Resources as it seeks to extract lithium from German deposits and becomes the first European carmaker to make a significant direct investment in battery raw material mining.
The move comes as automakers have to contend with soaring prices for key materials such as cobalt, nickel and lithium, adding to the pressure on the profitability of electric vehicles.
“This highly strategic investment in a leading lithium company will help us create a resilient and sustainable value chain for EV battery production in Europe,” said Carlos Tavares, owner of Stellantis.
The group, which includes the Fiat and Peugeot brands, plans to sell a total of 5 million pure electric vehicles globally by 2030.
Stellantis’ investment will make it Vulcan’s second-largest shareholder after founder and managing director Francis Wedin. The company is also backed by a group of Australian billionaire Gina Rinehart.
Vulcan has secured eight exploration licenses in Germany’s Upper Rhine Valley, where it hopes to extract lithium from geothermal brines, and last year purchased a facility in Innsheim with an existing production license. It also has an exploration license in the Montisa Battini volcanic area near Rome.
The company plans to begin commercial deliveries of lithium by the mid-2000s, subject to further approvals from local authorities in Germany and opposition from some nearby residents.
After surging in 2021, Vulcan’s shares in Australia and Frankfurt are down more than 50% this year as part of a broader market sell-off.
Several other automakers, including Volkswagen and Renault, have signed purchase agreements with the Vulcan, but those agreements do not include upfront investments. The company is using a technique called direct lithium extraction to separate the metal from the geothermal brine.
BMW last year invested in a rival company, Lilac Solutions, which it claims can efficiently extract lithium from brine. The company did not disclose how much it spent on the startup, but documents show the deal was worth a fraction of Stellantis’ value.
Automakers hit by persistent shortages of semiconductors and critical components are increasingly considering investments in technology and commodity companies to avoid supply bottlenecks after relying on contractors for materials and components for decades.
Tesla boss Elon Musk told a Financial Times conference in May that it was “not impossible” for his company to acquire a mining group.
“We’re not looking to buy mining companies, but if that’s the only way to accelerate the transition to electric vehicles,” he said, the possibility is on the table.
However, he added that such an acquisition would only make sense if Tesla could change the mining company’s trajectory.
The price of battery-grade lithium hydroxide has risen sharply. It is currently trading at $75 a kilogram, up 400 percent from a year ago, according to a Fastmarkets price assessment.
Direct lithium extraction (DLE) differs from traditional evaporation-based processes. Its proponents claim it has higher recycling rates and stronger environmental properties.
Rio Tinto agreed last year to buy Argentina’s DLE project Salar del Rincon for $825 million, saying it has the potential to significantly improve lithium recovery rates compared with solar evaporation ponds.
However, not everyone is convinced that small mining companies can make the technology work. Only the large US lithium producer Livent can boast of using DLE technology on a commercial scale.