The place Does Tesla Get its Lithium? (Up to date 2022)

Not like a few of its rivals, US electrical car (EV) pioneer Tesla (NASDAQ:TSLA) has been making strikes to safe provide of the uncooked supplies it wants to fulfill its manufacturing targets.

Lithium specifically has caught the eye of CEO Elon Musk. Again in 2020, the battery metallic had a highlight second at Tesla’s Battery Day, when Musk shared that the corporate had purchased tenements in Nevada, and was in search of a brand new option to produce lithium from clay — a course of but to be confirmed at industrial scale.

Since then, lithium costs have hit all-time highs and stayed elevated. Costs for different key battery metals have additionally elevated, resulting in greater prices for batteries themselves — in accordance with Benchmark Mineral Intelligence, uncooked supplies presently make up about 80 % of battery prices, up from round 40 % again in 2015.

“Worth of lithium has gone to insane ranges,” Musk tweeted again in April. “There isn’t any scarcity of the ingredient itself, as lithium is nearly in all places on Earth, however the tempo of extraction/refinement is sluggish.”

Most lithium mining occurs in Australia from hard-rock sources and in Chile from brines. However lithium refining is dominated by China, which presently accounts for greater than 75 % of worldwide lithium processing capability.

“I’d wish to as soon as once more urge entrepreneurs to enter the lithium-refining enterprise. The mining is comparatively straightforward, the refining is far tougher,” Musk mentioned on a July earnings name, including there are software-like margins to be made in lithium processing. “You may’t lose, it’s a license to print cash.”

Do Tesla batteries have lithium and cobalt?

As talked about, it wasn’t simply lithium that noticed costs climb final yr — cobalt doubled in worth in 2021. Most cobalt mining takes place within the Democratic Republic of Congo, which has been typically related to youngster labour and human rights abuses, fueling considerations over provide of this battery metallic in the long run.

In its batteries, Tesla is thought for utilizing nickelcobaltaluminum (NCA) cathodes developed by Japanese firm Panasonic (OTC Pink:PCRFF,TSE:6752). The sort of cathode has greater power density and is a low-cobalt choice, however has been much less adopted by the trade in comparison with the extensively used nickel-cobalt-manganese (NCM) cathodes. These aren’t the one cathodes containing cobalt that Tesla plans to make use of; South Korea’s LG Vitality Options (KRX:373220) is engaged on supplying Tesla with batteries utilizing nickel-manganese-cobalt-aluminum cathodes.

That mentioned, not all Tesla’s batteries comprise cobalt. For its standard-range autos, Tesla mentioned final yr it was altering the battery chemistry it makes use of to lithium-ironphosphate (LFP) cathodes, that are cobalt- and nickel-free. On the time, the corporate was already making autos with LFP chemistry at its manufacturing facility in Shanghai, which provides markets in China, the Asia-Pacific area and Europe.

How a lot lithium is in a Tesla battery?

For these within the EV area, it’s a truthful query to ask — how a lot lithium is there actually in a Tesla battery? The reply is that though it won’t be large in comparison with different uncooked supplies, it might change into a hurdle for any EV maker if there’s not sufficient, and sufficient of the proper high quality.

Again in 2016, Musk mentioned batteries do not want as a lot lithium as they want nickel or graphite — describing lithium as “the salt in your salad” and saying it’s about 2 % of the cell mass.

metal content of battery chemistries by weight

Metallic content material of battery chemistries by weight.

Chart through BloombergNEF.

However a key issue to recollect is quantity — given the quantity of batteries Tesla must ship its bold objectives, if it might’t safe a gentle provide of uncooked supplies, it may hit a bottleneck. After all, that is true not only for Tesla, however for each carmaker producing EVs at the moment and setting targets for many years to come back.

For that cause, demand for lithium is anticipated to soar in coming years. By 2030, Benchmark Mineral Intelligence forecasts lithium demand will attain 2.4 million metric tons (MT) of lithium carbonate equal — a lot greater than the forecasted 600,000 MT of provide anticipated to be produced in 2022.

Which lithium firms provide Tesla?

It is necessary to grasp that there’s not just one firm that provides lithium to Tesla.

On the finish of 2021, Tesla inked a contemporary three yr lithium provide take care of high lithium producer Ganfeng (OTC Pink:GNENF,SZSE:002460). The Chinese language firm will present merchandise to Tesla for 3 years ranging from 2022. Main miners Livent (NYSE:LTHM) and Albemarle (NYSE:ALB) even have provide contracts in place with the EV maker, and China’s Sichuan Yahua Industrial Group (SZSE:002497) agreed to produce battery-grade lithium hydroxide to Tesla again in 2020 for a interval of 5 years.

The corporate additionally holds offers with junior mining firms for manufacturing that’s but to come back on stream. Australia’s Liontown Sources (ASX:LTR) is ready to produce Tesla with lithium spodumene focus from its AU$473 million Kathleen Valley challenge. The deal is for an preliminary 5 yr interval set to start in 2024, conditional on Liontown beginning industrial manufacturing by 2025.

Core Lithium (ASX:CXO,OTC Pink:CXOXF), one other ASX-listed firm, additionally signed a take care of Musk’s Tesla to produce the automobile firm with as much as 110,000 MT of lithium oxide spodumene focus from its Finniss lithium challenge over 4 years. Core will start supplying Tesla within the second half of 2023.

Despite the fact that Tesla has secured lithium from all these firms, the EV provide chain is a bit extra complicated than shopping for lithium immediately from miners. Tesla additionally works with battery makers, resembling Panasonic and CATL (SZSE:300750), which themselves work with different chemical firms that safe their very own lithium offers.

What firm makes Tesla’s batteries?

Tesla is presently working with Japanese firm Panasonic, its longtime companion, and South Korea’s LG Vitality Options, the second largest battery provider on the earth. 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) will quickly provide Tesla with its Blade battery, a much less cumbersome LFP battery.

Are Tesla’s batteries costly due to lithium prices?

Battery prices have been rising on the again of inflation, worth hikes for uncooked supplies and the continued Russia-Ukraine warfare, amongst different elements. Uncooked supplies, together with lithium, presently make up about 80 % of battery prices, up from round 40 % again in 2015, in accordance with data from Benchmark Mineral Intelligence.

Lithium costs are up over 300 % year-on-year and greater than 120 % year-to-date, and it’s not solely spot costs which might be climbing — lithium producers have mentioned contract costs are additionally up, with some transferring from fastened to extra variable agreements.

Is there sufficient lithium for electrical vehicles?

There’s loads of lithium on the Earth’s crust, however extracting, processing and qualifying it for its use in EVs is a special story. Lithium demand from the EV sector is rising, a pattern that’s anticipated to proceed all through the last decade. However provide will not be maintaining, with many analysts and even lithium producers forecasting a decent market forward.

In the mean time, there aren’t sufficient uncooked supplies within the pipeline to take the vast majority of EV makers past 2030, as per Benchmark Mineral Intelligence.

Will Tesla purchase a lithium mine?

For carmakers, securing lithium provide to fulfill their electrification objectives is turning into a problem, which is why the query of whether or not they are going to change into miners sooner or later continues to come back up.

As talked about earlier than, again in 2020, on the firm’s Battery Day occasion, Musk stunned the lithium trade by saying Tesla had acquired the rights to lithium-rich clay deposits in Nevada; it mentioned it had discovered a option to mine the fabric in a sustainable and easy approach — utilizing desk salt and water.

However mining lithium will not be straightforward, and regardless of hypothesis, it is exhausting to think about an automaker being concerned in it, SQM’s (NYSE:SQM) Felipe Smith mentioned in June. “It’s important to construct a studying curve — the assets are all completely different, there are lots of challenges when it comes to expertise — to succeed in a constant high quality at an affordable price,” he mentioned. “So it is troublesome to see that an unique 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 could have to construct up EV provide chains from scratch after the capital markets’ failure to step up, as per Benchmark Mineral Intelligence’s Simon Moores. Moreover, automotive OEMs which might be making EVs will in impact need to change into miners.

“I do not imply precise miners, however they will have to start out shopping for 25 % of those mines in the event that they need to assure provide — paper contracts will not be sufficient,” he mentioned.

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Securities Disclosure: I, Priscila Barrera, 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 data 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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