Lithium Americas (NYSE:LAC) stock has produced electrifying recent gains. Shares of the Canada-based junior lithium mining company skyrocketed 44.2% in September and have raced out of the gate in October, gaining 29.1% in the first two trading days of the month. That brings their total gain to 86.1% in just over a month.

The company isn't currently generating any revenue or profits. It has two mining projects under development: Cauchari-Olaroz in Argentina, a 51%-49% joint venture with China's Ganfeng Lithium, in which Lithium Americas is the minority owner; and Thacker Pass in Nevada.

For context, the S&P 500 (including dividends) fell 3.8% last month and lost 4.2% from Sept. 1 to Oct. 2.

Here's what investors should know.

Lithium salt flats with mountains and blue sky in background.

A lithium salt flat. Image source: Getty Images.

Two notable industry catalysts 

We can probably boil the bulk of Lithium Americas' powerful recent market performance down to two related industrywide factors. 

First, expectations seem to be increasing that demand for lithium to make rechargeable batteries for electric vehicles (EVs) will be pulled forward relative to recent projections. (This sentiment excludes the shorter-term negative effect stemming from the pandemic.) In other words, the belief is growing that EVs will displace vehicles with combustion engines faster than previously expected.

Second, lithium stocks, in general, are benefiting from increased awareness among investors of the lithium space. This factor stems from the growth in news coverage of EVs, which is how this catalyst relates to the first one.

What's driving (pun intended) the belief that EVs are going to be kings of the road sooner than previously expected, and the rising investor awareness that they can bet on the EV revolution by investing in lithium stocks?

Several things, including a California executive order and news from EV pioneer Tesla's (NASDAQ:TSLA) "Battery Day." 

California bans sales of new gasoline- and diesel-powered cars in 15 years

On Sept. 23, California Gov. Gavin Newsom issued an executive order "requiring sales of all new passenger vehicles to be zero-emission by 2035." The order effectively bans the sale of new cars powered by fossil fuels within the state in 15 years. It also includes other provisions aimed at controlling climate change. 

Not surprisingly, California is on track to be the first state in the U.S. to phase out gasoline- and diesel-fueled cars, though 15 other countries have also committed to doing so, according to the state's press release.

The Golden State's move is obviously a boost for EVs, as the state is the largest car market in the country. Moreover, it seems likely that other states will follow California's lead. 

Tesla announces plans to enter lithium mining space

On Sept. 22, Tesla CEO Elon Musk announced during the company's "Battery Day" plans to enter the lithium mining space. The aim of taking control of a key part of its supply chain is to ensure it has adequate lithium supplies and to lower its lithium costs.

If Tesla is successful, it will mean that eventually, at least, it won't need to buy 100% of its lithium from third-party suppliers, as it does now. 

Overall, this news is a negative for lithium producers, as the industry will lose some key business if Tesla is successful. However, the event certainly brought the lithium industry to the attention of more investors. 

LAC Chart

Data by YCharts.

Lithium Americas' major recent stock moves

  • Sept. 14: Stock surged 16.3% (and continued to move up all week, notching a weekly gain of 47.1%) after mining consultancy firm Wood Mackenzie issued a report on the demand for lithium if the electric car industry grows as projected over the next five years.
  • Sept. 22-23: Stock dropped 27.9% in the two days following Tesla's announcement at its Battery Day. 
  • Sept. 25: Stock recouped much of its Battery-Day-related loss, gaining 18.9%. We can probably attribute this gain to some investors believing the sell-off was overdone. That take makes good sense to me, given that it's going to take many years for Tesla to be operating its own mine(s), if it's successful at all. Moreover, part of this gain can probably be attributed to the California news, which was partly overshadowed earlier in the week by the Tesla news.
  • Sept. 28: Stock soared 28% following news that Tesla signed a five-year agreement, which could be extended to 10 years, to buy lithium from Australian miner Piedmont Lithium. As my colleague Rich Smith wrote, lithium mining investors probably viewed this news so positively because it "strongly suggests that Tesla isn't planning to become wholly independent of lithium suppliers for quite some time."
  • Oct. 1-2: Stock popped 29.1%, which can probably be attributed to increased investor interest in the space following the Tesla-Piedmont news earlier in the week, and also possibly related to a European report suggesting EVs could take market share from conventional vehicles sooner than previously widely thought.

Here's the year-to-date performance picture for Lithium Americas stock.

LAC Chart

Data by YCharts.

A speculative bet

Investors should know that Lithium Americas stock is very speculative. As previously noted, the company is in the developmental stage, and isn't generating any revenue or profits.

That said, it's worth watching.

Less speculative investors interested in the lithium space might want to explore larger players Albemarle, Sociedad Quimica y Minera (known as SQM), and Livent. U.S.-based Livent is a pure play on lithium, while fellow U.S. company Albemarle and Chile-based SQM also produce other products.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.