Afghanistan holds key to lower EV prices, and that’s the problem

Rare earth metals like lithium, cobalt, and nickel are the crude oil of the electric vehicle (EV) era. As EVs gain wider acceptance, securing supplies for these rare earth metals - which like petroleum, are often located in politically unstable, high risk locations - becomes a problem for manufacturers.

Lithium for example, is mostly mined in Bolivia and Argentina. There is however, one more country that rivals Bolivia reserves – Afghanistan. The US Geological Survey estimates that Afghanistan’s lithium reserves to be at 21 million tonnes, making it the largest in the world.

The US Pentagon calls Afghanistan the Arabia of lithium.

But the accuracy of the estimate is disputed by many geologists, simply because it’s difficult for experts to independently assess Afghanistan’s mineral reserves and the USGS’s estimates are based on 1980s data provided by the Russians.

While the exact size of its reserves is in doubt, many agree that Afghanistan is sitting on one of the richest mineral deposits in the world. Getting the precious metals out however, is a problem. It’s no different from drilling oil in challenging deep seas off Alaska or in war-torn parts of Africa. The problem is less about cost or technology, but security.

The International Energy Agency estimates that global demand for lithium will be 42 times greater in 2040 than in 2020, cobalt 21 times, nickel 19 times.

Prices of lithium carbonate are now trading in China – the world’s biggest buyer of lithium - 120 percent higher than last year.

Still, prices of EVs are coming down rather than going up due to a combination of factors, ranging from government incentives to better battery and motor technology that require less rare earth metals.

Honda for example, is the first car manufacturer to use rare earth metal-free electric motors.

China’s CATL, the world’s largest maker of EV batteries, had in July unveiled a sodium-ion battery that contains no lithium, cobalt or nickel. It’s basically a battery made using sodium extracted from table salt.

The problem however, is these so-called table salt batteries have far lower energy density than lithium-based batteries, and there’s still a long way to go before the technology is ready to be commercialized on EVs.

If prices of rare earth metals continue to climb at their current rate, the savings gained from improved manufacturing efficiency and EV technology will not be enough to offset the increase in material cost.

The problem is made more complicated because unlike oil, vehicle manufacturers and their suppliers are expected to sort this problem on their own. Before this, Toyota for example, doesn’t need to care whether the petrol that goes into its cars are coming from Saudi Aramco or Russia’s Lukoil.

With EVs, cars are built with an ‘oil well’ inside, so to speak. As such, Toyota has to get involved because today’s standards for corporate responsibility and sustainability audits require manufacturers to ensure that their entire supply chain does not violate any UN convention.

This is an area where BMW leads. It is the only car company to integrate its sustainability report into its financial report, and the only car company that can boast of a truly green supply chain, down to where it sources the minerals that goes into making the batteries for its BMW iX.

For example, BMW sources most of its nickel from Congo but the country is not known for its labour rights and workers' safety protection. So BMW has taken it upon themselves to train the locals, to professionalize nickel mining.

China, being the world’s largest buyer of lithium is of course keen to secure more supplies of lithium for itself, and thus explains its recent diplomatic maneuvers.

Don’t be too quick to criticize them though, they are just taking a page off the US’ playbook, who will happily prop up an undemocratic, poor human rights record Saudi Arabia to secure oil for itself, while invading Afghanistan under the pretext of, in the words of George W. Bush in 2010, “Afghanistan was the ultimate nation-building mission. We had liberated the country from a primitive dictatorship, and we had a moral obligation to leave behind something better. We also had a strategic interest in helping the Afghan people build a free society… because a democratic Afghanistan would be a hopeful alternative to the vision of the extremists.”

Also read: No, the Toyota Hilux is no longer a ‘Taliban truck,’ but the Ford Ranger is