Despite challenges in recent years, the automotive industry remains a colossal €54bn sector. At the time of writing, nearly 50 million cars have been produced just in the year so far.

Unsurprisingly then, the industry has a major impact on the mining industry, which provides many of the main components used to build a vehicle. For example, the average car contains 1,090kg of steel. Such demand has helped the steel sector to grow over the last few decades, so that despite challenges in the industry it now produces 1665m tonnes a year.

In recent years this relationship has been changing, as electric vehicles (EV) have entered the market, driving demand for different minerals entirely.  . EV batteries now account for 50% of the cobalt demand in the world. The growth in the EV industry is predicted to grow substantially in coming years, increasing from 7% of all passenger car sales by 2025 to an impressive 38% by 2040.

Beyond this, the demographic of the sales is changing as burgeoning middle classes in countries such as China increasingly drive demand. Between 2000 and 2012, the urban middle classes – those earning between RMB 60,000 to RMB 229,000 ($9,000 to $34,000) a year – grew from 4% to 68% in China. This group has disposable income in a way previously seen, and has led to a boom in the automotive industry in the country.

With so many changes in the automotive industry, what will this mean for the mining and metals industries?

Changing mineral demand

As the world looks to electrification to clean up the transport network – which currently accounts for 15% of manmade emissions – the demand for key mineral components is growing.

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The scale of this growing demand is huge, so much so that there are already doubts as to meeting it. Research from the Institute of Sustainable Futures shows, for example, that under a 100% renewable energy scenario, demand for metals for electric vehicles and renewable energy technologies could exceed reserves for cobalt, lithium and nickel.

Nevertheless, demand has led to a major increase in the number of lithium, cobalt and nickel mining projects. As demand grows by 70,000 metric tons a year, the number of lithium mines around the world has greatly increased, with countries like Bolivia opening up areas like the Salar de Uyuni, a 4,000-square-mile salt flat that contains huge amounts of the white mineral for exploration and extraction to try and cash in on.

Already, concern is growing about the damage such booms in mining lithium could cause, if left unchecked.

But as the automotive market turns its attention to EVs, the mining industry is innovating to ensure that it can cheaply and effectively meet demand. Companies like Energy Exploration Technologies are developing technologies such as its metal organic framework membranes that can decrease the price of lithium and optimise extraction, thus increasing output.

“Our goal is to develop rapid, low-cost, lithium extraction and separation membranes with high recovery rates and minimal environmental impact,” explained Teague Egan, CEO of Energy Exploration Technologies in a recent interview with Forbes. “This, in turn, will dramatically improve output, as well as production economics for existing producers, and their customers beyond that.”

Core tech drives investment

The drive to advance technologies and improve EVs has had an effect upon the commodities used in the manufacture of the cars too. This will likely have an effect on mining in the long-term.

“Aluminium has been gaining ground in recent years thanks to its comparative light weight, which is extremely important for EVs, which rely on heavy batteries,” explains Almington Capital Merchant Bankers president John Engle. “Tightening fuel efficiency standards have also served as a tailwind for aluminium. On the flip-side, steel is cheaper and easier to source, so automakers are reconsidering the cost-benefit analysis.

“In essence, investing in the core tech (batteries and drive-train) is increasingly seen as most important, leading some to conclude that the cheaper steel option is preferable. The steel industry is also working on a lighter-weight alloy, which could see commercial deployment as soon as 2021, which should further hamper uptake of aluminium.”

Such considerations and technological changes are needed if the EV market is truly going to be the force for change it has long been heralded as.

“First, raw materials needed for batteries are extracted at a high human and environmental toll,” the World Economic Forum’s Global Battery Alliance notes. “This includes, for example, child labour, health and safety hazards in informal work, poverty and pollution. Second, a recycling challenge looms over the eleven million tonnes of spent lithium-ion batteries forecast to be discarded by 2030, with few systems in place to enable reuse and recycling in a circular economy for batteries.”

But there is a long way to go still as, of the 1.3 billion vehicles in the world, fewer than five million are EVs.

Demographic change to bring a boom in metals?

For years, as the industrial revolution swept through China bringing huge economic growth, the boom seemed unstoppable. This seemed to hold true in both the automotive and mining industries, especially as a burgeoning middle class sought out luxuries like cars. In 2017 for example, over 28 million cars were sold in China alone.

The boom is slowing however, and 2018 saw car sales drop to 22.4 million in what is the first annual decline in 20 years. So while China may continue to be an important market for the automotive industry and the mining industry that supports it, it can no longer be relied on in the way it has been previously. Many have looked to the growing middle class in India as a possible supporter of the industry, as the country has the fourth largest automotive market and an economy that continues to grow.

Certainly, with sales increasing 9.5% year-on-year to 4.02 million units in 2017, it is unsurprising that many have pinned their hopes of India’s middle class taking over and helping to support the automotive industry and the commodities that rely on it.

But so far, this has come to little fruition as automotive companies struggle to comply with new environmental policies, leading to a price hike in vehicles and a subsequent downturn in purchases.

But there are areas in which the automotive industry is growing in China and India, with the first being one of the biggest proponents of EVs globally, and both having strong policies in place to push EVs.

“China is definitely at the forefront of the EV market,” says Engle. “The reason China sells so many EVs compared to the rest of the world is largely the product of government action. The Chinese government has pushed aggressively to expand its EV sector compared to even the most generous Western regimes, such as Norway, the Netherlands, and California.”

Overall, it seems clear that the successes of the automotive industry can often be the successes of the mining industry, but only for a very specific number of commodities. The real vehicle market of the future is electric and there is predicted to be 125 million in use worldwide by 2030, with the real winners likely to be lithium, nickel and cobalt. But in order for them to maintain their green reputation, EVs will have to ensure that these key aspects are sourced from traceable sources.