Climate change is the catalyst for a global shift from internal combustion engine cars to electric vehicles. As a result, increased demand for materials needed to produce electric vehicles could reward investors in ASX mining shares over the long term.
The Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation published an Australian Electric Vehicle Market Study which found electric vehicles were expected to match petrol vehicles on upfront price and range by mid 2020s.
Building electric vehicles
The materials needed to build electric vehicles include lithium, cobalt, rare earths, graphite, manganese, copper, aluminium, and nickel.
A battery pack in a Chevy Bolt, for example, would require 8% copper, 6% cobalt, 5% nickel, 5% manganese and 2% lithium.
As more electric vehicles are manufactured, demand for these resources could soar, potentially boosting mining company profits depending on operational efficiency.
ASX mining shares that could benefit
After some digging, here are the ASX mining shares that I think could benefit from a rising demand for electric vehicle materials.
Oz Minerals Limited (ASX: OZL) could gain from the increased demand for copper. It's 2019 Annual and Sustainability Report states: "Short to medium term global copper demand is forecast to be higher than copper mine supply due to existing new uses of copper such as for electric vehicles. Increase in copper demand will increase the company's cash flow position and enables the company to pursue its growth pipeline to create value across all stakeholders."
Mining giant BHP Group Ltd (ASX: BHP) is could also be in to win from a surge in demand for copper. BHP is the world's top copper producer as reported in February this year, with a 57.5% interest in Escondida copper mine in Atacama Desert in Chile.
Lynas Corporation Ltd (ASX:LYC) could gain from a higher demand for rare earths. The rare earths are "essential inputs" to high growth global manufacturing supply chains, including digital age technologies and green technologies such as electric vehicles and wind turbines, according to the ASX mining share.
Galaxy Resources Limited (ASX:GXY) has lithium assets that could benefit from the rise in electric cars. And South32 Ltd (ASX: S32) produces nickel. Lithium and nickel are key components in electric vehicle battery packs.
Foolish Takeaway
When electric vehicles match the cost of a standard internal combustion engine cost, we could see a dramatic surge in demand in Australia and globally. As a result, the materials required by manufacturers could increase the earnings of ASX mining shares. And an investment in mining companies in the supply chain could reward long-term investors looking to gain exposure to the electric vehicle industry.
