Weekly Brief: Europe New Hub for Rare Earth but Not Yet

Swedish mining company LKAB stumbled across a deposit of rare earth elements that could reshape the manufacturing of electric vehicles in Europe and the United States.

LKAB discovered the elements near an existing mine in the far north of Sweden on the outskirts of the city of Kiruna. The company claims it to be the largest deposit of rare earth elements in Europe, which is currently 100% dependent on foreign countries, specifically China, to mine this valuable resource.

Rare earth elements comprise a group of 17 heavy metals. One of these, neodymium, is used to make permanent magnets, which are central in the manufacturing of EV motors, wind turbines, smartphones and other electronics. China currently controls about 90% of the mining, manufacturing and supply of neodymium plus about 60% of the world’s rare earth metals more broadly.

Back in 2019 China threatened to shut down all exports of rare earth elements to the US, which led automakers and miners on a desperate hunt to find other sources. Automakers have also experimented with EV motors that don’t use rare earth metals but have found that alternatives reduce how far an EV can travel on a single charge. “This is good news, not only for LKAB, the region and the Swedish people but also for Europe and the climate,” said LKAB CEO Jan Mostrom. “Electrification, the EU’s self-sufficiency and independence from Russia and China will begin in the mine,” added Ebba Busch, Sweden’s Minister for Energy, Business and Industry.

LKAB is currently building an underground tunnel from its existing mine to the new deposit to further assess the discovery. Initial estimates suggest more than a million metric tons, which could be enough to shift production patterns in Europe away from China as it transitions to a purely EV market by 2035. However, owing to the slow process of getting a new mine up and running, LKAB said it could take 10 to 15 years to bring the rare earth metals to market.

In other news, connected vehicle data group Wejo staved off bankruptcy thanks to a reverse merger with a blank check company… for the second time in two years! Wejo promises a world in which data processing can help to identify free parking spots, avoid accidents, communicate road conditions, optimize traffic lights and safely navigate extreme weather. The company went public via a special purpose acquisition company in November 2021, only for its shares to tank and its financial woes to mount. Last week the company announced that it’s set to pull off a second SPAC with a new blank check company called TKB Critical Technologies in a desperate bid to raise $100M.

A number of start-ups went public via SPACs during the pandemic, as an easier, faster backdoor way to access public capital. Those in the EV industry included Faraday Future, Lordstown Motors, Electric Last Mile, Nikola, Canoo, Fisker and Lucid. Many of those deals turned into disaster in 2022 with scandals, federal investigations and bankruptcies galore. Instead of learning from our mistakes, could 2023 be the year we double down with the double SPAC? Let’s hope not.

Volkswagen revealed that its BEV sales are booming, up more than 20% last year, despite global sales across all vehicle segments dropping. Paul Myles has the details.

Tesla continued to slash the cost of its vehicles in an attempt to woo new buyers. The EV maker reduced the price of all US vehicles by as much as 20%. The price drop brings the cost of the Model Y and Model 3 below $55,000, which allows them to qualify for the $7,500 federal tax credit. This is good news for buyers but has investors increasingly jittery about the state of things inside Tesla HQ, where pressure is mounting on every front. Company shares have dropped more than 70% in the past 14 months, wiping out half a trillion dollars in value. The likelihood of a widespread Autopilot recall and possible criminal charges for false advertising is growing. Elon Musk’s misadventures at Twitter show no sign of abating, while Tesla’s competitors are bringing more viable and affordable EV alternatives to market, which has led to a glut of vehicles sitting at its gigafactories or on dealership lots.