BERLIN (Reuters) - Germany and Bolivia on Wednesday sealed a partnership for the industrial use of lithium, a key raw material for battery cell production, in an important step to become less dependent on Asian market leaders in the dawning age of electric cars.

Brine is seen at the evaporation pools near the pilot lithium plant in Llipi, on the salt flats of Uyuni, Bolivia, November 29, 2017. REUTERS/David Mercado

Interest in battery metals such as cobalt, nickel and lithium is soaring as the auto industry scrambles to build more electric cars and cut noxious fumes from vehicles powered by fossil fuels in light of stricter emission rules.

“Germany should become a leading location for battery cell production. A large part of production costs is linked to raw materials,” German Economy Minister Peter Altmaier said.

“German industry is therefore well advised to secure its needs for lithium early in order to avoid falling behind and slipping into dependency,” Altmaier said, adding the deal was “an important building block” to secure this supply.

With the joint venture, Bolivian state company YLB is teaming up with Germany’s privately-owned ACI Systems to develop its massive Uyuni salt flat and build a lithium hydroxide plant as well as a factory for electric vehicle batteries in Bolivia.

ACI Systems is also in talks to supply companies based in Germany and elsewhere in Europe with lithium from Bolivia.

The joint venture aims to produce up to 40,000 tons of lithium hydroxide per year from 2022 over a period of 70 years.

Wolfgang Schmutz, CEO of ACI Group, the parent company of ACI Systems, said more than 80 percent of the lithium would be exported to Germany.

ACI Systems is in talks to supply a big German carmaker with lithium, according to a person familiar with the project.

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An ACI Systems spokeswoman declined to comment.

MORE CONTROL

For Germany, the public-private partnership is part of wider government efforts to support the production of battery cells in Europe and help companies get more control over the value-added chain of electric vehicles.

The government has earmarked 1 billion euros to support domestic companies looking to produce battery cells for electric vehicles as a way to reduce German carmakers’ dependence on Asian suppliers and protect jobs at risk from the shift away from combustion engines.

For Bolivia, the deal to extract lithium from the Uyuni salt flats in the Andes, one of the world’s largest deposits, enables the government to bring jobs to a region plagued by poverty.

Nicole Hoffmeister-Kraut, economy minister of Germany’s southwestern state of Baden-Wuerttemberg, the home region of ACI Systems, said the lithium deal would help German carmakers to become less dependent on Asian suppliers of car batteries.

The success of the venture now depends on whether both sides can reconcile economic interests with environmental and social requirements, she added.

LITHIUM TRIANGLE

Along with Argentina and Chile, Bolivia is part of South America’s so-called “lithium triangle”. The country has one of the world’s largest reservoirs of the metal, but so far has failed to set up a large-scale production.

President Evo Morales has sought to keep lithium from being exported merely as raw material and Germany’s willingness to help build production facilities in Bolivia played a key role in the decision to start the joint venture.

When Bolivia sought a foreign partner to develop Uyuni, a Chinese company seemed a natural fit, given China’s dominance in the global lithium supply chain and its strong ties with La Paz.

Instead, Bolivia picked ACI Systems, a company from southern Germany untested in lithium that nonetheless beat seven rivals from China, Russia and Canada.

Backing from German federal and regional ministries was key to persuading Bolivia ACI’s bid was serious, company and government officials from Bolivia and Germany told Reuters.