Mercedes, Stellantis plan investment in Serbia's lithium aspirations

Serbia and the European Union signed a framework agreement on providing critical raw materials as the Balkan nation seeks to leverage a planned lithium mine to become a regional hub for electric vehicle production.

The venture has been overseen by Serbian President Aleksandar Vucic, who sealed an agreement with German Chancellor Olaf Scholz in Belgrade on July 19. It rests on the reactivation last week of plans to transform a $2.4 billion project by global miner Rio Tinto Group into Europe’s biggest lithium mine. 

The EU has been seeking to set up an EV supply chain in Europe to reduce reliance on Asia.

Representatives of Mercedes-Benz Group and Stellantis, who are partners in the ACC joint venture, also signed a letter of intent in Belgrade to invest in the project to develop EV battery output. 

The discussions are a step forward in reviving Rio’s Jadar mine, which was blocked by Serbia two years ago following mass protests that brought cities across the country to a standstill. 

Mercedes is a potential customer of lithium from Serbia and would support bringing more of the battery value chain to the country, CEO Ola Kallenius said on July 19 in Belgrade.

"They are building a very modern mine and we are a potential customer. To make it economical, we would certainly have some of the value chain in the country," Kallenius said.

"Possibly up to the battery cell production ... we would support that," he said, adding battery cell producers would have the final say.

Stellantis has not commented on the lithium plan.

Scholz on July 19 defended the planned deal with Serbia and said that the mining project will not have a negative effect on the region’s environment.

People cannot complain that mining of certain minerals is restricted to a few countries — “among them a very big country in the East” — and at the same time oppose new mining projects in Europe, Scholz told reporters in London, ahead of traveling to Belgrade later in the day. The mining would be carried out in a way that won’t create “substantial damage to the environment,” Scholz added.

Creating a broader lithium industry — rather than just exporting the raw material — has been a key demand of the Serbian government in backing the Jadar project, as is seeks to capture value from its natural resources.

Should the mine get the go-ahead, it will be a major boost to Rio, Serbia’s economy and crucially Europe’s attempts to secure supplies of the raw materials needed to power the energy transition.

The European Union is wholly reliant on imports of the commodity used to make batteries. The bloc has pursued the development of its own EV supply chain to ease dependence on imports from Asia, though the faltering shift to EVs has seen a range of cell-making projects put on the back burner.  

This includes Mercedes and Stellantis, which have put on hold two of their three battery plants in Europe, set to cost a total of €7 billion ($7.7 billion), after vehicle demand fell short of expectations. Even if European battery champions emerge, the industry remains dependent on a raw materials and processing supply chain that is dominated by China. 

The initial pact signed July 19 sets out the establishment of a processing industry as well as battery making, Vucic said. That would ensure the production of materials as well as EVs qualifying for sale in the EU without attracting levies. 

Rio’s project looked dead in early 2022 when the government moved to block it. 

The company announced the project the previous year, before it had secured all the licenses needed and it quickly became a political issue, seized on by both environmentalists and opposition politicians. That led to thousands of protesters taking to the streets in late 2021.

Still, Rio continued to work on the project, engaging with local communities and seeking to allay environmental concerns. It also sought the support of Europe’s top automakers to help develop an industry in the country.

Vucic, the country’s dominant politician, has repeatedly expressed regret that the project was halted, saying it was a missed opportunity to boost Serbia’s economy. Last month, he said the authorities may soon let the Anglo-Australian company resume preparations to open the mine in 2028. 

Those efforts got a major boost last week when Serbia’s constitutional court overturned a government decree that in 2022 blocked the project.

The resumption of the project will be a big win for Rio CEO Jakob Stausholm. He approved the mine as one of his first major steps as chief executive, but it quickly backfired.

Bloomberg and Reuters contributed to this report