VIKASA Capital: What Investors Should Know About the Natural Resources Powering the EV Economy
The race toward a green future has shifted into the next gear.
Bolstered by government policies and automaker initiatives, electric vehicles (EVs) are quickly becoming a top priority for reaching key sustainability goals. EV sales sped past $2m in 2019 and are expected to accelerate beyond $11m in 2025 and $31m in 2030, according to forecasts by Deloitte.
These shifts promise to radically change our reliance on fossil fuels and decrease demand for gasoline over the long haul. But they will also raise demand for other important natural resources. For investors with an eye toward a greener economy, these new demands represent an exciting opportunity. Investing in these natural resources today will help shape a sustainable future — and provide value.
The Key Ingredients — Natural Resources
In the discussion about investing in sustainable energy, much revolves around reducing our dependence on fossil fuels. And rightfully so, given that reliance on fossil fuels is driving climate change toward potentially disastrous levels, as the International Panel on Climate Change (IPCC) emphasized in its August 2021 report.
The conversation should be broader than that, though. In reducing fossil fuel demand, the new EV economy will become increasingly dependent on lithium, gold, copper and salts. These four resources will be integral for creating a future built on clean technology.
Lithium is the central piece of the EV energy puzzle. The batteries that will run our cars depend on it for the near future, and an expected 14-fold increase in EV production in just over a decade will mean a massive growth in demand for lithium.
This demand has already put upward pressure on the price of lithium — and, consequently — fostered innovation by emerging companies to make improvements to the standard lithium-ion battery. That spells an opportunity for investors to step in and fund improved practices for mining lithium and putting it to more efficient use in EV technology.
Common in the jewelry industry, gold may not be first on anyone’s mind when they think of electric vehicles. Yet, it has been an important component in circuit boards for not only EVs but a wide variety of electronics over the years.
The electronic control systems inside electric vehicles are growing more complex every year. They manage emissions, provide driver assistance and monitor safety, among many other functions. Gold is an exceptional conductor, making it ideal for crafting the circuitry required to power and control these vehicles while meeting increasingly tight regulations. It’s also commonly used to make alloys for EV batteries.
It’s no surprise that the tech sector, including EVs, saw an 11% year-over-year increase in gold demand in Q1 2021. Forward-thinking investors would do well to take note.
Perhaps no metal is more integral to the EV economy than copper. Fully battery-powered cars use more than 3.5 times as much copper as a standard gas-powered vehicle. Not only is it used in the batteries, but in motor components, wiring throughout the vehicles and the entire EV charging infrastructure required to power these cars. Its conductivity and accessibility will continue to prove essential as production ramps up over the next decade.
According to the International Copper Association, electric vehicle manufacturing is expected to drive up copper demand by more than 800% between 2017 and 2027. And that’s only for the cars themselves. Every standard EV charger requires 0.7 kilograms of copper, and each fast charger uses as much as 8 kilograms of copper. As more electric cars hit the road, the need for chargers will skyrocket, pushing copper demand even higher.
Copper’s value recently hit $10,000 per metric ton, and some expect that it could reach as high as $20,000 by 2025. There’s a reason some investors are calling it “the new oil.”
While the other resources we’ve explored have been common in electronics for decades, there is another that’s only starting to come into play: salts. In particular, common table salt holds significant promise for the future of electric vehicles.
On one hand, Tesla has recently filed a patent for a new technology that will allow it to use table salt to more efficiently extract lithium. This process is expected to radically improve Tesla’s ability to safely and effectively extract the lithium needed to meet growing EV demand.
But that’s not all. Some scientists are even experimenting with replacing lithium with table salt as the main ingredient in rechargeable EV batteries. These “molten salt iron-oxygen batteries” present exciting new possibilities for the industry — and could make salt a surprising green investment opportunity in the years ahead.
The Future of Clean Tech
The need to address clean energy technology grows more urgent with every passing year. The IPCC report stresses the urgent need to keep global warming to no more than 1.5 degrees Celsius — a level we are already dangerously close to reaching. Scientists have tied our current level of warming to many of the extreme weather events we’re already witnessing, from record hurricane seasons to devastating wildfires. If we take no action, the IPCC emphatically argues, the temperature will rise by more than 1.5 degrees, and these damaging natural events will only grow in size and frequency.
Electric vehicles and other clean technology are critical to achieving this goal. A study by Northwestern University researchers, for instance, forecasted that a 75% adoption of EVs could save the U.S. $70bn a year in climate-related damages, not to mention thousands of lives. EVs aren’t the only piece of the puzzle, but they’re a crucial one — and these technologies must be developed in the most sustainable way possible.
That’s why VIKASA Capital is committed to investing in sustainable initiatives, especially electric vehicles and the clean tech needed to power them. Our goal is to help strengthen the U.S. domestic supply chain for sustainable resources as the world transitions to an EV economy. Partner with us to invest in a more sustainable future.
VIKASA Capital Inc. is a diversified financial institution founded in 2010 providing investment advisory, investment banking, and other financial services with national offices in Beverly Hills, Hawaii, Las Vegas, New York, Oklahoma City and San Francisco, and international offices in India, Mauritius and Singapore.