California Goes Ahead With Lithium Tax Despite Protests From EV Suppliers

  • California has approved a plan to tax the electric vehicle battery metal lithium to generate revenue for environmental remediation projects, Reuters reports.
  • The tax is structured as a flat-rate per tonne and will go into effect in January. 
  • Funds generated from the tax will help restore the Salton Sea region from damage in the 20th century.
  • Governor Gavin Newsom, a Democrat, approved the tax as part of a must-pass state budget amid divided opinions from the industry over its repercussions.
  • Mining executives acknowledged that extracting lithium from the region was expensive and could force them to move to other states with large deposits of lithium-rich brines.
  • Lithium industry executives supported the mitigation efforts but preferred a 2% or less of their sales levy. They saw a flat tax as economically destructive.
  • Lithium-ion batteries are the most common battery type used in modern EVs. These batteries have higher energy density versus lead-acid or nickel-metal hydride batteries. Their compact size made them ideal for the automotive industry. 
  • Two of the area's three lithium companies warned the tax would scare off investors and customers. The suppliers of General Motors GM and Stellantis N.V. STLA highlighted the possibility of leaving the state for lithium-rich brine deposits.
  • Price Action: GM shares closed lower by 4.95% at $31.80 on Thursday. STLA shares traded lower by 1.29% at $12.20 in the premarket on the last check Friday.

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