Because the vitality transition continues to unfold, US electrical automobile (EV) pioneer Tesla (NASDAQ:TSLA) has been making strikes to safe provide of the uncooked supplies it wants to satisfy its manufacturing targets.
Lithium particularly has been high of thoughts for CEO Elon Musk. Again in 2020, the battery steel had a highlight second at Tesla’s Battery Day, when Musk shared that the corporate had purchased tenements within the US state of Nevada, and was on the lookout for a brand new method to produce lithium from clay — a course of but to be confirmed at business scale.
Lithium costs went on to hit all-time highs, however swiftly declined final 12 months and persevering with on a downward development in 2024. Costs for different key battery metals have additionally decreased as EV gross sales progress has fallen throughout most international markets within the face of financial uncertainty and better rates of interest. In keeping with Goldman Sachs analysis, EV battery prices are at report lows and are forecasted to fall by 40 p.c between 2023 and 2025.
In a mid-2023 Tesla earnings name, Musk appeared relieved to see costs for the battery steel had declined. “Lithium costs went completely insane there for some time,” he stated. Decrease battery costs will deliver EVs nearer to price parity with inner combustion engines automobiles, resulting in wider adoption and elevated demand.
This spring, Musk invited Argentine President Javier Milei to the Tesla manufacturing facility in Austin, Texas, the place the 2 reportedly mentioned the funding alternatives in Argentina’s lithium sector. As a outstanding member of the prolific Lithium Triangle, the South American nation is the fourth main lithium producer by nation.
Australia’s hard-rock deposits and Chile’s brines are additionally high sources for the world’s lithium provide. However lithium refining is dominated by China, which accounted for 72 p.c of worldwide lithium processing capability in 2022.
Learn on to be taught extra about the place Tesla will get its lithium, how a lot lithium is in a Tesla battery and what the EV maker is doing to higher safe its lithium provide chain.
Which lithium corporations provide Tesla?
Tesla has offers with a number of lithium suppliers, some which can be already producers and a few which can be juniors creating lithium tasks.
On the finish of 2021, Tesla inked a three-year lithium provide take care of high lithium producer Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460), and the Chinese language firm started offering merchandise to Tesla beginning in 2022. Main miner Arcadium Lithium (NYSE:ALTM) additionally has provide contracts in place with the EV maker.
China’s Sichuan Yahua Industrial Group (SZSE:002497) agreed to produce battery-grade lithium hydroxide to Tesla by 2030. Beneath a brand new, separate settlement finalized in June 2024, Yahua is about to produce Tesla with an unspecified quantity of lithium carbonate between 2025 and 2027, with the choice to increase the contract by one other 12 months.
Tesla additionally holds offers with junior miners for manufacturing that’s but to come back on stream. Liontown Sources (ASX:LTR,OTC Pink:LINRF) is about to produce Tesla with lithium spodumene focus from its AU$473 million Kathleen Valley undertaking. The deal is for an preliminary 5 12 months interval set to start this 12 months, and manufacturing started in July 2024.The corporate expects to achieve nameplate capability in calendar Q1 2025.
In January 2023, Tesla amended its settlement with Piedmont Lithium (ASX:PLL,NASDAQ:PLL), which now provides the US automaker with spodumene focus from its North American Lithium operation, a three way partnership with Sayona Mining (ASX:SYA,OTCQB:SYAXF). The deal is in place by the top of 2025.
Despite the fact that Tesla has secured lithium from all these corporations, the EV provide chain is a bit extra advanced than simply shopping for lithium immediately from miners. Tesla additionally works with battery makers, resembling Panasonic (OTC Pink:PCRFF,TSE:6752) and CATL (SZSE:300750), which themselves work with different chemical corporations that safe their very own lithium offers.
What are Tesla batteries product of?
Tesla automobiles use a number of completely different battery cathodes, together with nickel-cobalt-aluminum (NCA) cathodes and lithium-iron-phosphate (LFP) cathodes.
Tesla is understood for utilizing NCA cathodes developed by Japanese firm Panasonic. This sort of cathode has larger vitality density and is a low-cobalt possibility, however has been much less adopted by the business in comparison with the extensively used nickel-cobalt-manganese (NCM) cathodes. Except for that, South Korea’s LG Power Options (KRX:373220) provides Tesla with batteries utilizing nickel-cobalt-manganese-aluminum (NCMA) cathodes.
As talked about, it wasn’t simply lithium that noticed costs climb in 2021 — cobalt doubled in worth that very same 12 months, and though it has declined since then, the battery steel stays important for a lot of EV batteries. Most cobalt mining takes place within the Democratic Republic of Congo, which is usually related to youngster labor and human rights abuses, fueling issues over long-term provide.
That stated, not all Tesla’s batteries comprise cobalt. In 2021, Tesla stated that for its standard-range automobiles it will be altering to lithium-iron-phosphate (LFP) cathodes, that are cobalt- and nickel-free. On the time, the corporate was already making automobiles with LFP chemistry at its manufacturing facility in Shanghai, which provides markets in China, the Asia-Pacific area and Europe.
In April 2023, Tesla introduced that it deliberate to make use of this kind of cathode chemistry for its short-range heavy electrical vehicles, which it calls “semi gentle.” The corporate can also be trying to make use of LFP batteries in its mid-sized automobiles.
On the high of this 12 months, Tesla made strikes to supply LFP batteries at its Sparks, Nevada, battery facility in response to the Biden Administration’s new laws on battery supplies sourcing, particularly on these sourced from China. Reuters stories Tesla battery provider CATL will promote idle gear to the automobile maker to be used on the plant, which can have an preliminary capability of about 10 gigawatt hours.
What firm makes Tesla’s batteries?
Tesla works with a number of battery suppliers, together with Panasonic, its longtime companion, in addition to LG Power Options, the second largest battery provider on the planet. They provide the EV maker with cells containing nickel and cobalt.
China’s CATL has been supplying LFP batteries to Tesla for vehicles made at its Shanghai plant since 2020. It’s additionally been reported that BYD Firm (OTC Pink:BYDDF,SZSE:002594) is supplying Tesla with the Blade battery — a much less cumbersome LFP battery — which the automobile producer has utilized in a few of its fashions in Europe. Moreover, BYD is about to work with Tesla on its battery vitality storage programs (BESS) in China, with a plan to produce 20 p.c of Tesla’s anticipated BESS manufacturing capability, with CATL anticipated to cowl 80 p.c. The manufacturing facility will use the businesses’ LFP batteries.
How a lot lithium is in a Tesla battery?
How a lot lithium do Tesla batteries truly comprise? That query is hard as a result of many components are at play. Sometimes, it will depend on battery chemistry, as demonstrated by the chart under, in addition to battery measurement.
For instance, the normal Tesla Mannequin S incorporates about 138 kilos, or 62.6 kilograms, of lithium. It’s powered by a NCA battery, which has a weight of 1,200 kilos or 544 kilograms.
The quantity of lithium in a Tesla battery can even range primarily based on mannequin and 12 months because the battery chemistries and weights are sometimes altering with every new iteration.
Again in 2016, Musk stated batteries do not require as a lot lithium as they do nickel or graphite — he described lithium as “the salt in your salad.” Because the chart under reveals, the steel solely makes up a couple of tenth of the supplies in every battery.
Steel content material of battery chemistries by weight.
Chart by way of BloombergNEF.
However a key issue to recollect is quantity — given the quantity of batteries Tesla wants to satisfy its formidable objectives, it may hit a bottleneck if it may’t safe a gradual provide of uncooked supplies. After all, that is true not only for Tesla, however for each carmaker producing EVs in the present day and setting targets for many years to come back.
For that purpose, demand for lithium-ion batteries is predicted to soar within the coming years. By 2030, Benchmark Mineral Intelligence forecasts that demand will develop by 400 p.c to achieve 3.9 terawatt-hours. Over the identical forecast interval, the agency sees the present surplus within the lithium provide coming to finish.
Will Tesla purchase a lithium mine?
For carmakers, securing lithium provide to satisfy their electrification objectives is changing into a problem, which is why the query of whether or not they’ll develop into miners sooner or later continues to come back up.
However mining lithium isn’t simple, and regardless of hypothesis, it is arduous to think about an automaker being concerned in it, SQM’s (NYSE:SQM) Felipe Smith stated. “It’s a must to construct a studying curve — the sources are all completely different, there are a lot of challenges when it comes to expertise — to achieve a constant high quality at an affordable price,” he famous. “So it is troublesome to see that an authentic gear producer (OEM), which has a totally completely different focus, will actually interact into these challenges of manufacturing.”
Even so, OEMs are coming to the belief that they may have to construct up EV provide chains from scratch after the capital markets’ failure to step up, Benchmark Mineral Intelligence’s Simon Moores believes. Moreover, automotive OEMs which can be making EVs will in impact need to develop into miners.
“I do not imply precise miners, however they’re going to have to begin shopping for 25 p.c of those mines in the event that they need to assure provide — paper contracts will not be sufficient,” he stated.
Nevertheless, final 12 months Musk made it clear to buyers that Tesla is extra targeted on creating its lithium refining capabilities, moderately than entering into the mining recreation.
The place is Tesla’s lithium refinery?
Tesla broke floor on its in-house Texas lithium refinery within the larger Corpos Christi space of the state final 12 months. Tesla’s lithium refinery capability is predicted to supply 50 GWh of battery-grade lithium per 12 months. Musk stated in late 2023 that building of the lithium refinery could be accomplished in 2024, adopted by full manufacturing in 2025.
That is an up to date model of an article first revealed by the Investing Information Community in 2022.
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Securities Disclosure: I, Melissa Pistilli, maintain no direct funding curiosity in any firm talked about on this article.
Editorial Disclosure: The Investing Information Community doesn’t assure the accuracy or thoroughness of the knowledge reported within the interviews it conducts. The opinions expressed in these interviews don’t mirror the opinions of the Investing Information Community and don’t represent funding recommendation. All readers are inspired to carry out their very own due diligence.
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