Why Mercedes-Benz is pushing into the Canadian battery materials sector

Mercedes-Benz Group is pushing into the Canadian battery materials sector with a new mining partnership and an eye to mineral refining and battery cell production.

The luxury automaker signed a memorandum of understanding Aug. 23 with the Canadian government, agreeing to collaborate with Ottawa on opportunities in the battery supply chain as it scales up electric vehicle assembly and jockeys with competitors for supplies of key metals such as lithium, nickel and cobalt.

“The clock is running, and the demand is huge, so it’s about execution now,” said Markus Schaefer, chief technology officer at the automaker following the signing.

Part of a business delegation accompanying German Chancellor Olaf Scholz on a three-day tour of Canada, Schaefer put pen to paper in Toronto. The trip also had stops in Quebec and Newfoundland. He said meetings with federal, provincial and municipal leaders during the visit showed Canadian governments are aligned on creating a battery ecosystem.

“We felt they’re working hand-in-hand, and I think that’s the best basis to achieve the very, very best result here.”

'FUTURE INVESTMENTS'

François-Philippe Champagne, federal minister of innovation, science and industry, said the collaboration deal with Mercedes-Benz — as well as a parallel agreement with Volkswagen — will start a new chapter in relations between Canada and the German automakers.

“It’s going to open the door to future investments.”

Mercedes-Benz’s accord with the federal government includes no defined commitment to Canada, but a separate deal disclosed Aug. 23 marks a concrete step toward Canadian raw materials finding their way into the automaker’s batteries.

The company is currently finalizing a binding agreement with Rock Tech Lithium Inc. for the supply of 10,000 tonnes of lithium hydroxide starting in 2026. The Vancouver-headquartered miner is developing a lithium mine in Beardmore, Ont., about 150 kilometres northeast of Thunder Bay, as well as a processing plant in Germany.

Rock Tech CEO Markus Bruegmann said the deal is expected to be firmed up in the next couple of weeks.

'ALL ABOUT PARTNERSHIP'

“This is all about partnership and the sustainable value chain,” Bruegmann told media, adding that such collaboration is required to meet growing demand for EVs.

Financial terms of the pending deal have not been disclosed.

Schaefer said the agreement with Rock Tech is part of a new stage of EV supply chain investment for Mercedes-Benz. The company has already begun building batteries with industry partners, but is now moving further upstream in the supply chain.

“We’re going now one step further, working with partners — sometimes in direct investments, sometimes in offtake agreements,” he said, noting these deals extend “down to the mine.”

While the prospective raw material supplies will be coming from Canada, the automaker’s initial focus is on securing key inputs for its European, as opposed to North American, plants.

Rock Tech, for instance, is planning a lithium hydroxide converter in Guben, Germany that would become the first of its kind in Europe. The site would process mined material from the company’s Georgia Lake project in Ontario, and potentially other mining sites, into the form of lithium needed for battery cells.

But both companies said Canadian mineral processing fell into their longer-term plans.

Bruegmann said Canadian mineral processing is part of the “second step” in its scale-up strategy. Schaefer, likewise, said Mercedes-Benz will be looking to localize its EV battery supply chain in North America as well, but the company “has to start somewhere.”

“We’d like to refine here as well. The question is, what can you do in a limited amount of time? The capital even needed for exploration and all the other activities needed are huge … so I think we have to divide a little bit the work that has been done.

“Once [refining] is possible and doable, then we will enter into it.”

As part of this broader drive to cover other emerging gaps in the EV value chain, Schaefer said he met with mineral exploration and processing companies as part of his visit to Canada.

The German automaker said it plans to seek further opportunities in mining, refining, cathode active materials and battery cell manufacturing in Canada, but it would not say whether it is in active talks with further Canadian battery supply chain companies.