The future of electric vehicles and lithium demand in Chile

With global lithium demand projected to increase by over 40 times by 2040, Chile is positioned as a leader in the transition toward cleaner and more innovative transportation. 

The global shift to electromobility is redefining the automotive industry and creating new opportunities in strategic markets like Chile, which holds over 30% of the world’s lithium reserves. 

In 2023, electric vehicles (EVs) accounted for 18% of global sales, a significant leap from negligible figures just a decade ago. 

This surge is driving the demand for lithium, a critical component of the batteries powering this transformation. 

The current electric vehicle market 

Companies such as Tesla, BYD, Volkswagen, and General Motors are leading the global EV market, valued at approximately US$260 billion in 2023. 

In 2023, EVs accounted for 18% of global vehicle sales, exceeding 14 million units. This growth, led by markets such as Norway (over 90% share) and China (nearly 40%), has been bolstered by government incentives and favorable regulations. 

However, markets like the United States and Europe are starting to show signs of slowing adoption rates. 

In the first half of 2024, EV sales rose by 22%, significantly outpacing the total automotive market’s growth. However, this expansion is beginning to show signs of deceleration following peaks in 2021 and 2022. 

Projections indicate that by 2030, EVs could make up 50% of total vehicle sales in key markets, with annual sales surpassing 26 million units. 

Factors such as advancements in battery efficiency, lower production costs, and growing consumer demand are accelerating this transition. 

Lithium: a key factor in the energy transition 

Lithium is the primary component in lithium-ion batteries, used in both electric and hybrid vehicles. Its high energy density and durability make it the preferred material in the industry. 

While alternatives like sodium and magnesium batteries are under development, their widespread adoption still faces technical and logistical challenges. 

The lithium industry also faces challenges related to sustainability and efficiency in extraction processes. However, innovations such as direct extraction methods and the recycling of used batteries are emerging as solutions to reduce environmental impact and mitigate supply risks. 

According to the International Energy Agency (IEA), global lithium demand could increase by 40 times by 2040, highlighting the importance of ensuring a sustainable and efficient supply chain. 

Chile’s strategic role in the lithium market 

With the world’s largest lithium reserves, Chile plays a critical role in the global supply chain. 

The National Lithium Strategy promotes public-private partnerships to develop sustainable extraction projects, aiming to double production by 2035. 

Notable projects include Chilean state-owned mining company Codelco’s involvement in the Atacama Salt Flat, the development of high Andean salt flats by national mining company Enami, and various private initiatives. 

Additionally, Chile is focusing on adding value to lithium through direct extraction technologies and the recycling of used batteries. 

Investment opportunities in lithium 

The growing global demand for lithium, driven by the expanding EV market, presents a unique opportunity for investors in Chile. 

The country not only boasts abundant resources, but also provides a regulatory framework and policies aligned with sustainability and innovation.  

Chile is well-positioned to lead the future of electric mobility and sustainability, offering an attractive environment for investors interesting in forming part this transformative shift. 

If you’d like to find out more about lithium investment opportunities in Chile, visit our website or contact us here.