(Bloomberg) -- As automakers seek stakes in lithium miners to lock in supplies for electric-vehicle batteries, they’re following a path already forged by their shareholders.

Take Tesla Inc., which is reportedly interested in buying Toronto-listed Sigma Lithium Corp. If Tesla succeeds, it would follow prominent funds including Manulife Financial Corp., 1832 Asset Management, Maven Securities, DZ Bank and several others that have been snapping up Sigma shares, even as they cut exposure to the electric-vehicle maker.

It’s not hard to see the attraction. Policymakers and governments around the globe have ratcheted up calls to move toward cleaner transportation and poured billions into developing EV infrastructure, which has caused the price of lithium — used in the batteries that power electric cars, buses and trucks — to skyrocket. In fact, lithium has been the top performing commodity in the past two years.

“Lithium offers investors an opportunity to get an exposure to the EV expansion at much lower valuations, and without ancillary exposure to a CEO selling billions of dollars in stock,” said Will McDonough, the chief executive officer of EMG Advisors, which runs the Element EV & Solar Battery Materials Futures ETF (ticker: CHRG) that invests in the futures of lithium, cobalt, copper, and nickel.

“The underlying technology of all EV batteries requires lithium,” he said. “There is yet to be a prominent player that does not require lithium as the cornerstone metal.”

General Motors Co. sent Lithium Americas Corp. shares flying when it became the Canadian headquartered miner’s largest investor, which helped the company break ground on a new mine this week. Other car makers stalk mining conferences in an effort to secure supply.

“You’re only as strong as the weak point in your supply chain, which is lithium,” Sprott Asset Management CEO John Ciampaglia said in an interview, adding that a supply crunch has led investors playing the electric vehicle transition to move their capital upstream, buying up undervalued lithium producers. Sprott launched a lithium miners ETF in February in an effort to capitalize on investor interest.

Despite the surging price of the metal, the stock prices don’t necessarily reflect the booming demand. Albemarle Corp. — the largest producer of the metal — has seen sales and income surge. Still, the stock trades at a roughly 11-times price to earnings multiple — below the 14.8-times multiple of the S&P 500 Materials Index and just a fraction of Tesla’s 56-times multiple.

In addition to their cheap valuations, fund managers and analysts see a catalyst for the stocks as new buyers for the equities emerge, including US auto giants. “These are probably not the last deals that we’re going to see in the space,” Pedro Palandrani, head of research for Global X ETFs, said in an interview, referring to carmakers buying lithium-mining stocks. 

Palandrani anticipates that more auto companies will take stakes in miners because the market for lithium is expected to quintuple to 3.7 million metric tons per year over the next decade from the current 800,000 metric tons. 

“Lithium miners have margins of a software as a service company,” Palandrani said, adding that EV investors are taking notice as the outlook for most EV-making startups flounder, and the legacy carmakers’ gas-fueled auto businesses make the opportunity from battery-driven cars murky.

Even so, investing in early-stage mining companies is fraught with a different type of risk than car manufacturers — and their shareholders — generally face, including the potential that a proposed mine doesn’t produce at the expected rate or mineral grade. Goldman Sachs Group Inc.’s commodities research head, Jeff Currie, recently warned carmakers against buying lithium miners by saying “it always ends in tears” when commodity consumers move upstream.

Still, investors and car makers continue to bet on lithium miners, wagering that a shift toward EVs will become a permanent trend that will boost demand for the metal. “Lithium is today the common denominator across all battery technology and it’s likely going to stay that way for the next 10 to 15 years,” Global X’s Palandrani said, adding that he expects lithium producers to outperform.

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