Volkswagen is looking for serious, long-term contracts with cobalt producers, according to a Reuters report on Friday. Cobalt is a common component in lithium-ion rechargeable batteries, and it's projected to command more and more demand as electric vehicles are adopted in greater numbers. Currently cobalt is trading at about $26 per pound.
Securing reserves of the kinds of materials used in batteries will be key to Volkswagen’s future growth. After the so-called “dieselgate” scandal of 2015, Volkswagen Group pledged to pivot away from diesel to electric vehicles (EVs). The German automaker has said it wants to produce up to 3 million electric vehicles by 2025 and offer 80 electric vehicle models across all 12 brands by 2030. If VW Group succeeds, it would be a considerable feat given that so far there are only about 2 million EVs of any brand on the road worldwide.
As more automakers move to develop EVs, the minerals used to make car batteries will become more and more important. In 2015, Tesla secured two contracts with mining companies Bacanora Minerals and Rare Earth Minerals, as well as Pure Energy Minerals to explore lithium deposits in northern Nevada and Mexico. Cobalt is often used as a component in electric powertrain batteries because cobalt-based lithium batteries tend to have high energy density (although other materials like nickel and manganese can be used in lithium-ion batteries as well, depending on the battery application).