OREANDA-NEWS. Struggling with toxic air pollution levels, China is looking to alternative fuels with renewed urgency. Battery grade lithium prices have spiked in the country since 2015, with the domestic rate of electric vehicle production reaching 37,000 units through May; its highest point in the year so far according to the latest reports. The appetite for electric vehicles is one that is being increasingly endorsed by government authorities as subsidies and tax breaks are hastily introduced to offset the more expensive retail prices, mining,com reported. Bloomberg estimates that 35% of light vehicles sold will be electric by 2040, generating a battery market worth a projected US$250 billion.

With the swell of recent battery orders, lithium prices climbed another 5.5% through June 2016. Panasonic, a leading provider in the industry, predicts that it will double battery sales by 2020. Data from Benchmark Mineral Intelligence showed a concurrent demand story: Lithium prices are up 43% so far this year, while the cost of intermediate refining product, lithium carbonate, jumped 4.3% through June 2016. Analyst expect prices to continue inflating throughout the rest of the year as industry majors struggle to expand their lithium output and gain access to raw materials.

Tesla has invested heavily in the renewable energy source. Elon Musk’s $5 billion Gigafactory development in Nevada is only 15% completed, but the company estimates it will be able to churn out half a million electric vehicles annually by 2018.