Chile plans to nationalize lithium mines to capitalize on switching to electric vehicles

Chile is the second largest lithium producer in the world and has the third largest reserves. Photo: Rodrigo Abd/AP

The President of Chile plans to nationalize the national lithium industry, transferring control of a material critical to the production of electric vehicles to state control.

The move follows Mexico's decision last year to do the same with the auto industry. manufacturers are battling for limited stocks of the metal.

Analysts warn that Chile is the world's second-biggest lithium producer and third-biggest reserves, forcing the auto industry to take notice of higher prices.

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While car batteries can be made from other metals, lithium is the technology of choice for current models and is expected to be for some time to come. Demand for the metal is skyrocketing and new deposits could take years to develop.

President Gabriel Boric said the decision would help Chile retain more of its lithium-generated wealth and protect the environment.

< p> He said: “This is the best chance we have for the transition to a sustainable and developed economy. We can't afford to waste it.»

While demand for lithium will rise rapidly in the long term, the lull in demand is currently forcing Tesla and others to lower the price of their vehicles. Photo: Rodrigo Abd/AP

The government will honor existing contracts with companies, some of which run until the 2040s, he said. The two largest lithium producers, Albemarle and SQM, supply Tesla and Korean battery maker LG.

Analysts say the move could slow investment in the country as outside firms are likely to favor Australia.

«Political stability is very important for any mining project … where additional funds are invested,» Harsh told Reuters Bardia, an analyst at National Australia Bank.

The move can be seen as a renationalization of some of the lithium assets, as SQM was state-controlled until privatized in 1983 under dictator Augusto Pinochet.

He appointed his son-in-law, Julio Ponce Leroux, as president of the entity controlling the sale, and he now controls a 17 percent stake in a company valued at around $3.4bn (£2.7bn), according to Forbes estimates.

While the appetite for lithium will grow rapidly in the long term as manufacturers shift to making battery-powered vehicles, the lull in demand is currently forcing Tesla and other companies to lower the prices of their vehicles.

This comes when the Ford boss warned that the competitive market for electric vehicles meant they had to rethink the design of their cars as it opposes the «beautiful» Chinese models.

Ford chief executive Jim Farley told reporters at an event in Detroit that the mid-car market is «completely crowded» . ”, and that his company will need to find a way to increase sales there.

“Differentiation really comes down to technology and services,” he said. “They are all beautiful. All these cars are very beautiful. Go to China.”