California Goes Ahead With Lithium Tax Despite Protests From EV Suppliers

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  • 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 (NYSE: GM) and Stellantis N.V. (NYSE: 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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