Mercedes cool on mining equity stakes

Access to battery raw materials, particularly as both Europe and the US attempt to pivot away from reliance on China and reshore or nearshore supply chain domestically or withing ‘friendly’ countries, is a key concern of Western OEMs. And Germany’s Mercedes-Benz is no exception.

The firm has “started deep sourcing on the battery electric raw material side”, its CEO Ola Kallenius told analysts on its Q2 results call. “We want to be able to control our destiny in terms of supply chain for battery electric vehicles, and for those raw materials,” he explained.

And he highlighted in particular a memorandum of understanding (MoU) his firm signed with the government of Canada in August 2022. The purpose of the MoU is to promote cooperation and to explore ways to advance opportunities across Canada’s EV supply chain, “including, but not limited to, securing sustainable sources of raw materials”, says Mercedes.

It is “great that Canada has it all” in terms of battery metals, Marcus Breitschwerdt, executive vice-president at Mercedes, told the IAA Mobility conference in Munich this week. But this is not the sole motivation behind the MoU.

“The spirit which is the foundation of the agreement and the understanding between the Canadian government and Mercedes-Benz is actually that, sure, we are interested in the raw material, in a way which is also for us undisputedly clean in terms of ESG — environmental, social, governance criteria — and it is also about the green energy you have,” he says.

The wider picture, though, is that “you can go upstream, downstream; you have top-notch research, you have the raw materials, and you have everything in between”, Breitschwerdt continues.

But going upstream has its limits. Since the start of this year, Franco-Italian OEM Stellantis has signed or extended seven supply agreements for battery metals. In five of them, it has taken an equity stake in the projects supplying the material.

Mercedes is not planning on taking the same route. “Being a stakeholder in mining, that is not at the moment the direction of our thoughts,” says Breitschwerdt.

“There is no principle which would stand against it, but we feel in a country like Canada you do not need to be a stakeholder, you can simply be a contract partner and that is good and safe enough because you can trust and the whole legal system is reliable. In other places you might prefer to own because you do not trust too much in the surrounding system,” he continues.

That makes a lot of sense — inherently, if you have an offtake agreement in a reliable jurisdiction, it should be comfort enough. But it is also worth noting that Stellantis’ equity investments include projects in Australia, the US and Norway, hardly the legal Wild West, with only a stake in an Argentinian copper project (and even that in a Toronto-headquartered company) potentially falling into a category of more unreliable.

Mercedes, though, is comfortable with strategic partnerships such as it signed in October last year with German-Canadian start-up Rock Tech Lithium to secure high-quality lithium globally as part of a direct sourcing approach.