General Motors paid Livent Corp $198 million in advance to secure a supply of lithium essential for the production of electric vehicle batteries for six years. The agreement between the two parties shows the auto industry’s concerns about a tightening market for minerals essential for manufacturing electric vehicle batteries.
Paying cash in advance for mineral supplies is not uncommon in the mining industry. The deal shows GM wants to ensure it has enough raw materials to meet its target of producing 1 million EVs annually in North America by 2025.
“GM is certainly thinking for the long term here,” Paul Graves, Livent’s chief executive, told investors on a Tuesday conference call. “By making the advanced payment, they are clearly giving us the commitment that we were looking for.”
Graves has long encouraged the auto industry to work more closely with lithium manufacturers. Graves in an interview with Reuters last fall, said unless the auto industry signs a long-term deal, “there may be periods where lithium is insufficient.”
Livent itself produces lithium in Argentina and has processing facilities in the United States. The company will start supplying GM in 2025 at a contract price per tonne.
Livent is also known to supply lithium to BMW. Livent in the second quarter posted a net profit of $60 million.