It is no secret that speculation in the mineral exploration is currently being driven by optimistic forecasts about the market penetration of electric vehicles and the future impact on demand for lithium ion batteries. That, in turn, is driving investor interest key battery ingredients, including lithium, cobalt and nickel.
But in a new report, BMO Capital Markets says battery costs may not come down as fast as many analysts have predicted.
As a result, it says that although it is difficult to accurately predict the pace of transition from fossil fuel-powered ICEs (internal combustion engines) to EVs (electric vehicles), BMO believes its best case estimate of a 10% penetration rate by 2025 (a 30% compounded annual growth rate) is reasonable.
It is a view that is based on the challenges associated with advancing lithium battery chemistry in order to achieve cost parity with the internal combustion engine and increase the energy necessary to reduce consumer range anxiety.
BMO believes these challenges are not well understood by the market.
“Based on our detailed work on battery chemistry, we believe the consensus view that the next generation of lithium ion battery formulation NMC811 (8 parts nickel, 1 part manganese, 1 part cobalt) is readily achievable is optimistic,’’ the investment firm said.
“We believe it will be more technically challenging to develop, which impacts some of the more optimistic lithium ion powered EV adoption forecasts,” it warned.
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