Toyota's Lithium-Based Future

| About: Toyota Motor (TM)
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Toyota Motor Corporation (NYSE:TM) and Toyota Tsusho (South Sea) Corporation (OTCMKTS:OTC:TYHOY) have each made their own significant investments throughout the lithium supply chain. Yet collectively, their Joint Venture has allowed for a junior lithium explorer, currently surveying throughout Argentina, and has permitted a major ramp-up in the production of large format lithium-based batteries, en route to the mass roll out of the Toyota Prius Plug-in Hybrid Electric Vehicle (PHEV).

Direct Investment in Emerging Argentine Low Cost Lithium Project

Toyota Tsusho established a Joint Venture (JV) with Australian-based Orocobre Limited (OTCMKTS:OTCPK:OROCF), a company who is aggressively working on a low-cost lithium brine project in Jujuy, Argentina. With the addition of Toyota, the project has continued to develop and today, the Olaroz Lithium Project is estimated to have reached a construction cost of USD$229M, including contingency. The Olaroz Lithium Project, fully funded through the Mizuho Corporate Bank, has joint equity contribution from both, Orocobre and Toyota. Orocobre holds 66.6% ownership of the project, with Toyota owning 25%, and 8.5% belongs to the Juju Province Mining and Energy Company (JEMSE). It has been projected that production will generate 17,500 tonnes per annum of low-cost battery grade lithium carbonate. Orocobre has recently provided a quarterly update informing their investors that the project is to be completed on time and within budget. Orocobre claims it is building the first large scale "green fields" lithium brine project in approximately 20 years at a capital cost of US$229.1m and will have a design capacity of 17,500tpa of battery grade lithium carbonate.

Increasing Consumer Demand for Lithium Based Automobiles

The Toyota Prius Plug-in Hybrid (PHEV), manufactured by Toyota Motor Corporation, was launched throughout select international markets in 2012. The Prius PHEV, based on a third-generation Toyota Prius, is outfitted with a 4.4 kWh lithium-ion battery system where as the standard Prius Hybrids are equipped with a nickel-metal hydride battery pack. In spite of the latter offering key technology advantages for non plug-in hybrids, the battery packs are bulkier, heavier, and more costly. Since the soft launch of the improved product, publications have reported that world-wide sales of the Prius PHEV have exceeded 31,100 units. 15,103 units were sold within the USA, and, as the first Half of 2013, there had been 4,417 units sold throughout Europe. The total Prius PHEV sales represent over 136 MWh of battery capacity, an extremely bullish number for an emerging lithium supply chain.

USD$194 Million Lithium-Ion Battery Facility

The Nikkei Business Daily stated that Toyota Motor Corporation was planning to increase production of lithium-ion batteries by six (6) times. It was also reported that a new production line was being planned at a cost of approximately USD$194M, allowing production to have an output capacity of 200,000 units per year. The report did not include if Toyota would begin to outfit all their Prius models with lithium-ion batteries, or have them solely for the PHEV model.

Toyota's recent chain of announcements indicates a long-term industry shift to lithium-based automobiles. Another pure play EV manufacturer is high flying emerging Tesla Motors (NASDAQ:TSLA) who has recently shook up the industry with its "GigaFactory" announcement. Telsa provides investors with significant exposure to the EV market while Toyota is a conservative long term EV play. Junior explorers such as Orocobre are direct plays although they could easily be acquisition targets if they reach production, proving commercial viability of their projects. It is also important to note there is significant amount of geopolitical and currency risk with companies that operate in Argentina. For the faint of heart, Global X Funds offers a Lithium fund (NYSEARCA:LIT) which may decrease direct volatility and exposure to a single lithium company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.