GM deal the poster child for the US’ Inflation Reduction Act | Hotter on metals

General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world

It’s a bold step for the automotive company that, to date, has so far relied mostly on offtake agreements for its supply of critical minerals used in the production of batteries for electric vehicles (EVs).

GM’s direct investment into a lithium mine project is a demonstration that original equipment manufacturers (OEMs) recognize the need to integrate supply chains to ensure reliable and sustainably produced sources of key raw materials. It’s also likely to be replicated by other OEMs in the coming months with the race to net-zero heating up.

The move makes sense in light of the Inflation Reduction Act (IRA), passed in the US in August and designed to encourage domestic mining and manufacturing and create more integrated supply chains for EVs, which have typically relied on overseas countries for critical minerals and battery components.

The commercial imperative is also clear. Tesla recently said that it expects tax credits from the IRA to be worth $150-250 million per quarter this year to the automaker and to increase through the year as its car volumes grow.

The IRA will undoubtedly have been an important factor influencing GM’s investment, the largest-ever by an automaker to produce battery materials like lithium.

The US automotive company is planning to build more than one million EVs annually in North America in 2025. That’s the same amount of EVs that the lithium extracted and processed from Thacker Pass can support, according to Lithium Americas, which owns the project.

While GM won’t be using Thacker Pass lithium in its Ultium battery cells yet — the company has other sources for now — the project will eventually make a big dent in its future lithium needs. GM will have exclusive access to Phase 1 production at the mine, slated for 2026 and the right of first offer on Phase 2 production.

GM has been dipping its toes into the mining sector for a while now. In July, it made a multi-million-dollar injection into Controlled Thermal Resources’ Hell’s Kitchen lithium extraction project near Los Angeles, California, scheduled to start producing in 2024.

The auto maker is already making battery cells at its Ultium joint venture with LG Energy Solution in Ohio. It is planning more facilities in Michigan and Tennessee that are scheduled to open this year and next, and which will eventually feed its car plants in North America.

Battery material supply chain investments ramp up

A similar direct investment in the supply chain is being made by Tesla, with more expected by other OEMs.

Tesla, which has constantly repeated calls for nickel, lithium and other critical minerals, has already secured the rights to a lithium deposit in Nevada, where it aims to produce lithium from clay deposits using a process developed by the company.

All of this comes against a backdrop of a sharp increase in lithium prices, which bottomed out in 2020 and have risen since following a revival in demand from the downstream battery sector for EVs.

There are, of course, a limited number of projects available for investment, making the playing field competitive and the opportunities relatively scarce.

Thacker Pass itself has faced years of delays and is still awaiting its fate in a ruling by a US Federal Court that could finally green-light its construction.

If that approval is given, the project may well become the poster child for the IRA as far as battery raw materials are concerned.

Visit our dedicated battery materials page to discover more insights on the factors at play in the industry in 2023 and beyond.

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