By Kishori Krishnan Exclusive To Lithium Investing News ^{[1] [2]}

US President Barack Obama is a convert.  Impatient with the progress of hydrogen fuel cells, which always seem to be "about 20 years way", he ripped up the previous administration's financial commitment to hydrogen development to instead focus on the electric vehicles. This, he has maintained, is the quicker technological route ^[3]to lowering emissions.

He is not alone. During last year's American presidential campaign, John McCain laid out his plans to jump-start the electric car industry with a US$ 300-million reward for whomever could build a better battery.

Washington has already handed out over US$ 9 billion in loans to Ford, Tesla and Nissan to promote cleaner vehicles. The latter is to build an automotive battery plant in Tennessee.

Mid-year, Ontario too jumped in to pledge incentives of as much as $10,000 per car, to lure drivers into buying electrics.

What appears to be happening here? And why are there vast sums of money sloshing around for electric cars?

Electrifying ideas

A vital ingredient in the next generation of car batteries is lithium batteries, which have been playing a key role in the auto industry.

They are by no means new. Lithium-ion batteries have been around for a while. It is only now that they are making headlines.

Ask auto major Honda, which revealed a hydrogen car prototype called the FCX a decade ago, before leasing a limited number in 2002. In 2008, the company created a new version ^[4].

Touted to cost around $330,000 per vehicle, Honda plans to build no more than 200 electric cars during the next two years.

And they can't be bought. Honda leases them out. Only 10 Americans , including actor Jamie Lee Curtis, are the proud owners. After all, having to shell out US$ 600 a month, makes the electric car equivalent to leasing out a $51,000 Acura RL (a luxury version of the Accord sedan) in the US.

Clearly, lithium is the next break out investment, given that they are to be used in all plug-in hybrids and electric cars.

And even as the auto industry is gearing up to make its first real go at marketing plug-in vehicles for the masses, the road signs are clear. The start flag has dropped and the race to build lithium-ion batteries for vehicles has started.

Hurdles aplenty

The first real roadblock has already chanced up on the horizon.

The main idea to `go green' was also aimed at reducing the West's dependence on Middle East oil. However, that was not to be.

Analysts maintain that the whole idea of "going green" would necessarily have the United States scanning for "probables" outside its borders.

For, if the US does not develop a lithium-ion battery manufacturing sector at home, it may as well down the shutters on the electric car business - for he who makes the batteries will also make the cars, so to say.

In its urgency for electric cars, powered by lithium-ion batteries, the United States will perforce have to rely on foreigners. And not very friendly ones at that.

In 2007, three countries met 94 per cent of the world's total demand of lithium carbonate.

China is a major source of the mineral, as are Chile and Argentina. However, the world's largest undeveloped lithium deposit is located in Bolivia, which has already indicated it won't let foreign companies mine its reserves. Clearly, Bolivia is no friend of the US ^[5].

Asian major

Given that China is one of the countries with the largest lithium reserves ^[6] in the world, the country could well have a strangle-hold any time soon.

China's proven lithium reserves (converted into pure lithium) have reached 3.35 million tons, meaning China ranks the third in terms of salt lake brine lithium reserves and ranks the fourth in terms of lithium ore resources.

In 2007, the global lithium carbonate demand was 93,000 tons, up 7.4 per cent year on year. The CAGR in the recent ten years is over 7 per cent, showing a robust growth.

China's demand for lithium carbonate has grown rapidly. Starting from 2008, China's production capacity of lithium carbonate has entered a releasing period. It is expected that China's lithium carbonate output will amount to 45,000 tons and its designed production capacity will surpass 60,000 tons by 2010, when China will become a net exporter of lithium carbonate.

Why is this important?

Industry experts maintain that China is seeking to become the pacemaker of a new-energy automobile industry in the future, aided by strong policies from the government.

By 2011, annual production capacity of new-energy autos could stand at 500,000, and 5 per cent of new vehicles, including lorries and buses, should be new-energy ones, according to a government plan.

China ranks the third largest auto producer worldwide in terms of production capacity, only behind the United States and Japan. Last year, the country produced 9.35 million automobiles, an increase of 5.21 per cent year on year.

And that is only one sector to use lithium-ion batteries: automobiles.

Red signal

But the idea of relying on a foreign power for domestic consumption was just not easy to swallow.

Incidentally, in a report to Congress mid-2009, the US Government Accountability Office warned that by switching from gas-powered cars to lithium battery cars, the US could simply “substitute reliance on one foreign resource for another.”

President Obama's aim is to have one million electric cars on US roads by 2015, but the road ahead is clearly still pothole ridden.

Short trip

Barack Obama's whirlwind visit to China has resulted in several "roadmaps" and "action plans" to deepen US-Sino cooperation.

Of utmost interest was the deal for electric vehicles, which is of huge interest to both the Obama administration and plenty of Chinese firms.

The US-China Electric Vehicles Initiative was signed during the trip.

White House released a list of the seven energy-related deals ^[7] finalized in Beijing.

Given the several millions that are being dispersed by the US administration indirectly to lithium, attention has now shifted to the expected boom in the prices of lithium explorers and producers.

Clearly, nations flush with lithium reserves are poised to reap a financial windfall.  As are companies.

Ever heard of TNR.V ^[8],  BYD ^[9], GXY ^[10], TSX-V:LI and ^[11] TSX-V:RCK ^{[12] [13]}?

If yes, we would like to hear your views on them.

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