By: Spencer Dickson, Sales Associate
The automobile industry has experienced significant transformations over the years, one of the most notable shifts being toward vertical integration. Companies in this sector are increasingly looking to control various aspects of their supply chain, from manufacturing to the acquisition of natural resource assets. This strategic approach is designed to enhance efficiency, reduce dependency on external suppliers, and secure access to essential raw materials.
In recent years, automobile companies have taken vertical integration a step further by investing in the purchase of natural resource assets. This strategy aims to secure access to essential raw materials, such as rare metals and minerals, to mitigate potential supply chain risks. This has been highlighted through recent transactions, including Stellantis’ strategic investment of US$90M in Argentina Lithium & Energy. Argentina Lithium and Stellantis will enter into a lithium offtake agreement. Stellantis has agreed to purchase up to 15,000 tonnes per annum of lithium produced by ALE over a seven-year period.
Several other notable examples highlight the trend of automobile manufacturers purchasing natural resource assets:
- Tesla has been actively involved in securing its battery production. In 2020, Tesla entered into agreements to purchase lithium from mines in Nevada, signaling its commitment to vertical integration and sustainability.
- Stellantis has been actively acquiring stakes in Argentina based mines, as mentioned above. Another notable transaction was their investment in McEwen Copper for ARS $30B in February and another ARS $42B, on October 11. It’s expected Stellantis will continue to be active in the resource space and may have found Argentina as their source of battery metals.
- Toyota Motor is working on vertical integration by developing solid-state batteries and investing in partnerships for battery materials. This strategy allows the company to maintain control over battery technology and materials sourcing.
Vertical integration in the automobile industry, coupled with the purchase of natural resource assets, represents a strategic shift that helps manufacturers secure their future in an increasingly competitive and dynamic market. By taking control of critical components and raw materials, companies can ensure a stable supply chain, reduce production costs, and maintain a focus on quality and innovation. As the industry continues to evolve, this trend is likely to become even more prominent, with companies seeking to minimize their exposure to external risks and ensure a steady supply of vital resources.