General Motors will invest $650mn in a US lithium mine, a record investment by a carmaker to secure the raw materials used in electric vehicle batteries.
The US group will make an initial investment of $320mn by mid-2023 in return for exclusive rights to the first stage of lithium production at Lithium America’s Thacker Pass in the US state of Nevada and almost 10 per cent of the miner’s shares, with a further $330mn to follow later on.
“It’s a landmark transaction, and it certainly won’t be the last major supply chain announcement for GM,” chief executive Mary Barra said on Tuesday as the company reported strong fourth-quarter results.
The deal comes as GM prepares to boost its electric vehicle offerings by accelerating production of the Cadillac Lyriq and the GMC Hummer this year, as well as launching electrified versions of the Chevrolet Equinox, Blazer and Silverado pick-up truck. The company said it intended to manufacture 400,000 EVs in the first half of 2024.
EV makers are on the brink of a price war, increasing the importance of keeping vehicle production costs under control. Ford on Monday cut prices on its Mustang Mach-E, following Tesla’s lead from earlier in the month. But GM said that while it would monitor the market, “right now we’re priced where we need to be,” Barra said.
GM will cut $2bn in costs over the next two years through attrition and limited recruitment, chief financial officer Paul Jacobson said, adding that the carmaker was not planning job cuts. Consumer demand for its cars and trucks is holding steady, but “we want to be cautious” given a potential slowdown in the US economy.
The company on Tuesday forecast earnings before interest and taxes in 2023 ranging between $10.5bn and $12.5bn, after reporting record adjusted earnings before interest and taxes of $14.5bn in 2022.
Lithium Americas’ Thacker Pass mine is expected to begin production in the second half of 2026 and will generate enough lithium for up to 1mn EVs a year.
Despite being among the most lithium-rich countries in the world, the US has only one operational lithium mine, which is also located in Nevada. Thacker Pass has been opposed by conservation groups, and a district-court ruling is likely to decide its fate within months.
Lithium has risen to the top of carmakers’ security of supply concerns for future EV production. The metal’s price has surged about 10 times since the start of 2021 because of shortages, and developers have been struggling to bring new production online on time.
Ford, GM and Stellantis, the owner of the Jeep and Peugeot brands, have invested in or offered pre-financing to lithium, cobalt and nickel producers. GM’s latest investment, however, represents a significant escalation in the contest to secure battery metals and highlights growing integration between the automotive and mining industries.
The US Inflation Reduction Act, President Joe Biden’s flagship climate legislation, included tax credits for consumers on EVs that source their battery raw materials from the US and free-trade partner countries. That has added to the urgency for carmakers to secure domestic supplies.
Jacobson said that while the company intended “to leave the mining to the experts”, its need for materials already exposed it to the resource industry’s risks.
“By partnering with [Lithium Americas]we think we can lower the risk to us,” he said.
With $650mn from GM, US government loans and existing cash on the balance sheet, Lithium Americas has enough funds for the $2.3bn Thacker Pass project, according to chief executive Jonathan Evans.
He said he expected other carmakers to strike similar deals to secure battery metals. “I think the dam will break,” Evans told the Financial Times.
The second tranche of funding will follow after Lithium Americas’ Thacker Pass mine has been separated from its Argentine businesses. The split is regarded by analysts as crucial for Lithium Americas to access US government funds because the mining company is partly owned by Ganfeng Lithium, a leading Chinese lithium producer.
GM shares were up almost 8 percent on Tuesday afternoon in New York.