How the lithium shortage could impact EV production

Piedmont CEO Keith Phillips joins Yahoo Finance to discuss how his lithium plays a role in EV production

Video transcript

SEANA SMITH: Demand for lithium is a key component in batteries for electric vehicles. It's skyrocketing. The price of lithium-based chemicals is soaring as a result. So this brings up the question about what this means for the future adoption of EVs. So for more on that, we want to bring in Keith Philips. He's the CEO of Piedmont. And Keith, it's good to see you. Ford, GM, Stellantis, they all have shifted their strategies to focus on electric vehicles. Now, of course, we face this potential shortage in lithium, which is a key component for the batteries that we need for these EVs. What does this mean for future adoption?

KEITH PHILLIPS: It's a great question. I think we'll be fine. But, you know, first of all, thanks for having me. I think you're right. Ford, GM, and Stellantis are all in. The Germans are all in. Other car companies around the world are all in on electrification. These are better cars. They're smoother, quieter, faster. Everyone's going to want one eventually.

And for each electric car, you need a battery. For each battery, you need lithium. There's plenty of lithium today for the market at the current size it's at. But with EV demand growing over 100% this year and expected to grow 30%, 40%, 50%, a year per year for the next several years, I think we'll undoubtedly see shortfalls. You have seen lithium prices more than double this year.

The good news is that will make it easier for some people to bring their projects online. And that'll bring supply with it. And I think manufacturing prices for EVs generally and the costs are falling enough that the car companies can adapt to slightly higher lithium prices. I think we'll be fine.

SEANA SMITH: And Keith, that's where your company comes into play. I know you have a plan here in order to address some of these supply shortages. So how does your company play into this and hope to potentially solve this issue?

KEITH PHILLIPS: Well, we plan to become America's biggest lithium hydroxide producer. That is our goal. Right now, the country produces very little lithium of its own. Basically, 99% of the world's lithium raw material is produced somewhere else, mostly Australia, Chile, and Argentina. And 90% of the lithium hydroxide production, a chemical you need in longer range batteries, occurs in China. Very little occurs in the US.

So the US market today is growing fast. We think we'll need 30 or 40 times more lithium by 2030 in this market. We want to be self-sufficient. We aim to be the biggest producer here. And we're doing it by developing a very large project in North Carolina. And interestingly, all of the world's lithium came from North Carolina from the 1950s to the 1980s. There were two old mines that are now depleted. There's a very large mineral belt about 30 miles west of Charlotte, really an ideal place to be producing.

So we're going to produce spodumene concentrate and lithium hydroxide in North Carolina. We also intend to do the same in Quebec up in Canada. And we've got an investment in a very attractive asset in Africa, as well in Ghana. And we hope to bring that material over to North America to be converted as well. So our company has kind of grown rapidly in terms of our mineral resources. We intend to keep doing that. And we know the markets there. We're confident the domestic car companies and their battery suppliers will want domestic raw materials, and we want to be there to fill that demand.

SEANA SMITH: So Keith, the batteries is one part of this equation. Then, of course, one of the other issues that's plaguing the adoption of EVs is the lack of infrastructure. Of course, you don't have nearly the number of charging stations. That's just one example there, just for people in order to-- I guess if these automakers are able to reach their goal, that's one potential issue that we face. How big of a challenge do you see this being? And do you think the Biden administration needs to do a little bit more to address this?

KEITH PHILLIPS: That's a great question. First, I think the Biden administration is doing a great job putting this front and center. I think they're very focused on it. That's great. Having said that, you know, this is a capitalist economy. There are a lot of private sector people already doing this. GM today, I think, or yesterday announced a commitment to help build 40,000 different chargers across the country. Tesla has a large charging network. People like ChargePoint, Linkcharging, et cetera, are building thriving networks.

So I think you'll see-- I think charging infrastructure will grow as it's needed. You know, I drive a Tesla myself. I've got-- and I think what you find is 99% of the trips are fairly much-- are fairly local. It's very easy to charge in your garage if you have one or nearby. And the charging really isn't a big issue. It's more of an issue on a long extended trip, which happens periodically. But I'm confident, you know, as demand grows, and all the resources that are currently dedicated to the automotive parts supply chain, repair shops, et cetera, those are going to be distracted or deflected toward electrification. You're going to need a lot of things built for electrification. And I think it'll all come in due course.

SEANA SMITH: Keith, from your perspective, just in terms of the plans that we've heard, you mentioned GM making that announcement this morning about charging stations. We know GM has committed about $35 billion to the EV space through 2025. We've also gotten plans from Ford from a number of the large automakers. Which, in your opinion, is best positioned to succeed?

KEITH PHILLIPS: I think, you know, I'm not in a great position to say. We know them all. We have a lot of respect for all the companies. I think it's interesting. Certainly, Tesla is the global leader. Tesla's certainly the leader here. I think VW has built a strong market position in Europe. I know all the big companies here are throwing very significant resources, both dollars and people at this.

And there's a lot of brand loyalty. In this market, this is an SUV and pickup market. We have a number of guys on my team who drive, say, a Ford F-150. They're going to want the Ford F-150 Lightning when it's available. They're not going to want someone else's truck. They're going to want that one. And I think you're going to see a lot of that.

So I think there will be room for a lot of them to succeed. It's a process. And it's the whole supply chain, from building the electric car plants to building the battery plants to the cathode plants to the lithium resources. And it all needs to happen to succeed. The one great thing from our perspective, the sort of irreplaceable element in the electric car, as VW has said, is lithium. There are lots of other materials you can include in the battery and incorporate alongside lithium, but you need to have lithium. There's very little domestic production. We're very excited to be able to help address that problem.

SEANA SMITH: Keith Phillips, the CEO of Piedmont, always great to speak with you. And thanks so much for joining.