For BMW AG, striking compelling deals for the long term supply of cobalt in a market where there is a growing shortage of the most important material for battery production for electric vehicles, is crucial as the German auto maker believes that by the middle of the next decade, its need for cobalt and lithium will increase 10-fold due to its won demand for car batteries.
The auto maker’s head of procurement said in Munich on Friday that deals that would ensure a steady flow of the metals for the batteries in the five to ten-year period range was nearly complete. Auto makers, which include companies like Volkswagen, are now attempting to ensure that they have adequate supply and provisions for the metals because of an anticipated supply shortage – specifically that of cobalt, in the near future. By the year 2030, 300-model battery-powered vehicles are being targeted to be offered by VW and on eth other hand, 25 electrified vehicles is being planned to be offered to the market by BMW by 2025.
“We’ve been intensively focusing on how to manage future cobalt supply for about a year now,” said Markus Duesmann, the BMW purchasing executive. “Before, it wasn’t clear just how quickly demand will accelerate.”
There has been a tow fold increase in the price of cobalt so far this year. Cobalt is in demand because it is the metal that helps in conducting electricity and is also very light in weight.
There would be need for inventing alternative sources of cobalt for auto makers because it would be in very high shortage inn the near future, said Glencore Plc which is the biggest miner of the metal.
“By 2025, we’ll need up to 10 times as much of the battery raw materials than we do currently,” Duesmann said. the target for BMW this year is to sell at least 100,000 cars which would at least be part powered by electricity, he noted. “Today we are a leading manufacturer of electrified vehicles, so a 10-fold increase until 2025, for us, is enormous.”
The anticipated supply side constraints would be required to be solved n an urgent basis given the very fast enhancement in the electric-car segment. Volkswagen has plans to focus on battery powered cars and autonomous-driving systems in the next five years and intends to invest over 34 billion euros ($40 billion).
“In the past three to four months, we’ve noticed that other manufacturers are seriously looking at cobalt supply,” said Duesmann. “It’s gotten more hectic and changed a lot over the past year, since so many more are looking for deals.”
(Adapted from Bloomberg)