Honda to spend $40 billion on electric vehicle fleet

Long time readers will know we have been investing in companies that will provide the raw materials that are critical for the electrification of the global economy.

We have particularly emphasised the shift away from internal combustion engines towards electric vehicles (EV’s) as one of the main demand drivers in the medium term for these raw materials.

This morning, we saw one of the world's biggest carmakers Honda also commit to fully electrifying its car fleet by 2040 with $40 billion in investment into its electric vehicles manufacturing capabilities.

All of these vehicles will require even more lithium supply to be able to produce the lithium-ion batteries which feeds directly through to the prospects of our lithium investments across our Next Investors, Catalyst Hunter, and Wise Owl portfolios.

With other major OEM’s including Tesla, VW, Daimler all making large capital investments in developing large scale battery manufacturing facilities with commitments to electrifying their car fleets, we expect demand for lithium to remain strong over the next 5-10 years.

In a previous Quick Take we went through a presentation by Pilbara Minerals CEO Ken Brinsden, where he highlighted that it takes 1-2 years to build out these facilities whereas it takes ~7 years to bring a new resource discovery into the production stage.

More investment by another OEM as large as Honda will mean there is even more pressure on the demand side of the lithium market.

With lithium carbonate prices trading at ~US$78,000/t, up from ~US$13,000/t this time last year, Ken’s comments clearly highlight the structural supply/demand issues behind this move.

We hold the following lithium companies across our portfolios, which gives us exposure to this market. Click on the company names below to read our 2022 Investment Memos where we detail what we want to see the company achieve this year.

Vulcan Energy Resources (ASX:VUL) - Next Investors portfolio

• Zero Carbon Lithium, development stage, European Union (Germany)

European Metals Holdings (ASX: EMH) - Wise Owl portfolio

• Development stage, European Union (Czech Republic)

Latin Resources (ASX:LRS) - Catalyst Hunter Portfolio

• Exploration Stage WA (Brazil)