What happened

Lithium Americas (NYSE:LAC) stock popped on Tuesday and was trading up 9.8% as of 2:10 p.m. EDT. Four factors drove the lithium stock higher today: lithium prices, Albemarle (NYSE:ALB), Tesla, and Canada's Toronto Stock Exchange (TSX).

So what

Lithium hydroxide prices hit all-time highs of $20,000 per metric ton on Sept. 8, according to S&P Global. The primary reason is a surge in electric vehicle sales in China that has driven demand for lithium-ion batteries higher. Between January and August, sales of new electric vehicles (NEVs) in China jumped 194% year over year, according to data from the China Association of Automobile Manufacturers. NEVs include battery-electric, plug-in hybrid electric, and fuel cell electric vehicles. In another example of how rapidly the EV market is growing, consider that Tesla's sales more than doubled in the first half of the year.

The combination of soaring demand and prices is the perfect recipe for growth for lithium stocks. In fact, Lithium Americas made it onto TSX's 2021 TSX30 list, announced today, showcasing the 30 best-performing stocks on the exchange in the past three years. Lithium Americas shares gained 162% during that period, according to the report.

An adult and child charging an electric car at a charging station.

Image source: Getty Images.

Its inclusion in the top 30 list right when lithium prices are soaring appears to have reignited investor interest in Lithium Americas stock today. The exuberance is, in fact, a carryover from last week when Lithium Americas popped after rival Albemarle outlined an incredibly bullish outlook about the lithium markets during its investor day.

Among other things, Albemarle projects global EV production to grow tenfold by 2030 and demand for lithium to grow at compound annual rate of 30% through 2025. Its projections and revenue outlook even encouraged several analysts to bump up their price targets on the lithium stock on Monday. UBS and BMO Capital Markets, for example, upped their targets to $290 a share each, Oppenheimer posted a price target of $296 per share, and Deutsche Bank sees Albemarle stock hitting $270 per share.

This morning, EV bulls got another huge jolt when the largest battery recycling company in the U.S., Redwood Materials, revealed plans to build a massive battery materials plant in the U.S. that could produce enough to power a whopping 5 million EVs by 2030. Redwood has Tesla's co-founder J.B. Straubel at its helm, so investors do give weight to the company's views.

Now what

The lithium industry is clearly red-hot right now, and with so much happening all around, there's no shortage of triggers for the market to drive EV stocks like Lithium Americas higher.

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.