The place Does Tesla Get its Lithium? (Up to date 2023)

Because the power 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 fulfill its manufacturing targets.

Lithium particularly 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 within the US state of Nevada, and was searching for a brand new method 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, regardless of retreating in 2023, have stayed elevated. Costs for different key battery metals have additionally elevated, resulting in increased prices for batteries themselves. Based on Benchmark Mineral Intelligence, uncooked supplies presently make up about 80 p.c of battery prices, up from round 40 p.c again in 2015.

“Value of lithium has gone to insane ranges,” Musk tweeted again in April 2022. “There isn’t a scarcity of the ingredient itself, as lithium is nearly in every single place 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 p.c of world lithium processing capability.

“I’d prefer to as soon as once more urge entrepreneurs to enter the lithium-refining enterprise. The mining is comparatively straightforward, the refining is way more durable,” Musk mentioned throughout a July 2022 earnings name for Tesla, including that there are software-like margins to be made within the lithium-processing enterprise. “You’ll be able to’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 in 2021 — cobalt doubled in value that very same yr, and though it has declined since then, the battery metallic stays important for EV batteries. Most cobalt mining takes place within the Democratic Republic of Congo, which is commonly related to little one labor and human rights abuses, fueling considerations over long-term provide.

Tesla is thought for utilizing nickel-cobalt-aluminum (NCA) cathodes developed by Japanese firm Panasonic (OTC Pink:PCRFF,TSE:6752). One of these cathode has increased power density and is a low-cobalt choice, however has been much less adopted by the business in comparison with the broadly used nickel-cobalt-manganese (NCM) cathodes. Other than that, South Korea’s LG Vitality Options (KRX:373220) is engaged on supplying Tesla with batteries utilizing nickel-cobalt-manganese-aluminum cathodes.

That mentioned, not all Tesla’s batteries comprise cobalt. In 2021, Tesla mentioned that for its standard-range autos it could be altering to lithium-iron-phosphate (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.

In April 2023, Tesla announced that it plans to make use of this sort of cathode chemistry for its short-range heavy electrical vehicles, which it calls “semi gentle.” The corporate can be wanting to make use of LFP batteries in its mid-sized autos.

How a lot lithium is in a Tesla battery?

How a lot lithium do Tesla batteries really comprise? For these within the EV area, it is a honest query to ask.

The reply is that despite the fact that it won’t be an enormous quantity in comparison with different uncooked supplies, lithium can turn out to be a hurdle for any EV maker if there’s not sufficient — or not sufficient of the best high quality.

Again in 2016, Musk mentioned batteries do not require as a lot lithium as they do nickel or graphite — he described lithium as “the salt in your salad” and mentioned it’s about 2 p.c of the cell mass. Whereas he underestimated that quantity, because the chart beneath reveals, the metallic nonetheless solely makes up a few tenth of a given battery.

metal content of battery chemistries by weight

Steel content material of battery chemistries by weight.

Chart through BloombergNEF.

However a key issue to recollect is quantity — given the quantity of batteries Tesla wants to fulfill its bold targets, it may hit a bottleneck if it might probably’t safe a gradual provide of uncooked supplies. 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 return.

For that purpose, demand for lithium is predicted to soar within the coming years. By 2030, Benchmark Mineral Intelligence forecasts that lithium demand will attain 2.4 million metric tons (MT) of lithium carbonate equal — a lot increased than the forecast 900,000 MT of demand expected in 2023.

Which lithium corporations provide Tesla?

It is essential to know that there’s not just one firm that provides lithium to Tesla.

On the finish of 2021, Tesla inked a recent three yr lithium provide take care of high lithium producer Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460). The Chinese language firm will present merchandise to Tesla for 3 years beginning in 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 provide battery-grade lithium hydroxide to Tesla again in 2020 for a interval of 5 years.

The corporate additionally holds offers with junior miners for manufacturing that’s but to return on stream. Liontown Sources (ASX:LTR,OTC Pink:LINRF) is ready to provide Tesla with lithium spodumene focus from its AU$473 million Kathleen Valley undertaking. 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) was beforehand in talks with Tesla to provide the automobile firm with lithium from its Finniss undertaking, however negotiations collapsed in October 2022. The lithium agency remains open to additional dialogue with Tesla.

In January 2023, Tesla amended its agreement with Piedmont Lithium (ASX:PLL,NASDAQ:PLL), which is now set to provide the US automaker with spodumene focus from the past-producing North American Lithium operation — a undertaking Piedmont is growing with Sayona Mining (ASX:SYA,OTCQB:SYAXF). Underneath the amended settlement, the ASX-listed firm will ship roughly 125,000 MT of spodumene focus to Tesla starting within the second half of 2023 via to the top of 2025.

Although Tesla has secured lithium from all these corporations, the EV provide chain is a bit more complex than shopping for lithium instantly from miners. Tesla additionally works with battery makers, corresponding to Panasonic and CATL (SZSE:300750), which themselves work with different chemical corporations that safe their very own lithium offers.

What firm makes Tesla’s batteries?

Tesla is presently working with Japanese firm Panasonic, its longtime associate, in addition to 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 also 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.

Are Tesla’s batteries costly due to lithium prices?

Battery prices have been rising on the again of inflation, value hikes for uncooked supplies and the continuing Russia-Ukraine battle, amongst different elements. As talked about, uncooked supplies, together with lithium, presently make up about 80 p.c of battery prices, up from round 40 p.c again in 2015, based on data from Benchmark Mineral Intelligence.

Lithium costs are at historic highs, and it’s not solely spot costs — lithium producers have mentioned contract costs are additionally up, with some shifting from fastened to extra variable agreements.

Is there sufficient lithium for electrical vehicles?

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

In the intervening 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 targets is changing into a problem, which is why the query of whether or not they may turn out to be miners sooner or later continues to return up.

As talked about, again in 2020, Musk stunned the lithium business by saying Tesla had acquired the rights to lithium-rich clay deposits in Nevada; it mentioned it had discovered a method to mine the fabric in a sustainable and easy method — utilizing desk salt and water.

However mining lithium isn’t straightforward, and regardless of hypothesis, it is onerous to think about an automaker being concerned in it, SQM’s (NYSE:SQM) Felipe Smith mentioned. “You must construct a studying curve — the assets are all completely different, there are lots of challenges when it comes to know-how — to achieve a constant high quality at an affordable price,” he famous. “So it is tough to see that an unique tools producer (OEM), which has a totally completely different focus, will actually interact into these challenges of manufacturing.”

Even so, OEMs are coming to the conclusion 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 are making EVs will in impact should turn out to be miners.

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

Which firm is the highest lithium producer?

When wanting on the world’s lithium producers by market cap, the highest three are: US-based Albemarle, which has lithium brine operations within the US and Chile and hard-rock operations in Australia; Chile’s SQM, which has its essential operations within the Salar de Atacama in Chile; and Chinese language firm Ganfeng, which has assets all over the world.

The place is Tesla’s lithium refinery?

Although Tesla doesn’t mine lithium in the meanwhile, it not too long ago broke ground on its Texas lithium refinery. Musk has mentioned the ability may produce sufficient lithium for about 1 million EVs by 2025. The corporate is anticipating to complete constructing the location by subsequent yr, reaching full manufacturing a yr after. Tesla’s lithium refinery capability is but to be introduced.

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, 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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