US carmaker Tesla needs lithium to power its electric vehicles, but where does the company get it from? Find out more here.
Tesla’s Strategy to Secure Raw Material Supply for EV Production
As the energy transition continues, Tesla has been making moves to secure the supply of raw materials required to meet its EV production targets. Lithium has been a focus for the company, with CEO Elon Musk highlighting the battery metal’s importance at Tesla’s Battery Day in 2020. The company purchased tenements in Nevada, with plans to develop a new method to extract lithium from clay. However, lithium prices have hit all-time highs since then, increasing the cost of batteries. China currently dominates the lithium refining market, accounting for over 75% of global lithium processing capacity.
Cobalt is another essential battery metal that doubled in price in 2021, although it has since declined. Most cobalt mining takes place in the Democratic Republic of Congo, which has concerns over child labor and human rights abuses, fueling concerns over long-term supply. Tesla has used nickel-cobalt-aluminum (NCA) cathodes, which are a low-cobalt option with higher energy density, developed by Panasonic. However, the widely used nickel-cobalt-manganese (NCM) cathodes are more commonly used in the industry.
Tesla has also been working on reducing the use of cobalt in its batteries, with LG Energy Solutions developing nickel-cobalt-manganese-aluminum cathodes for Tesla’s batteries. In 2021, Tesla announced that it would be switching to lithium-iron-phosphate (LFP) cathodes for its standard-range vehicles, which are cobalt and nickel-free. Tesla has already been using LFP cathodes in its vehicles produced in Shanghai, which supply markets in China, the Asia-Pacific region, and Europe. The company plans to use LFP batteries in its semi light heavy electric trucks and mid-sized vehicles in the future.
The Role of Lithium in Tesla Batteries and Its Supply Chain
For those interested in the EV space, understanding how much lithium is in Tesla batteries is an important question to ask. Although the amount of lithium in a single cell is not significant compared to other raw materials, a lack of sufficient lithium can pose a problem for any EV maker. Elon Musk once compared lithium to “the salt in your salad,” stating that it makes up only 2 percent of the cell mass, but this estimate was later found to be low. In fact, lithium accounts for only about one-tenth of a given battery. However, the demand for lithium is expected to increase in the coming years, and supply chain challenges could arise for every carmaker producing EVs today and in the future if a steady supply of raw materials cannot be secured.
Tesla has signed supply contracts with major miners such as Livent and Albemarle, and Chinese manufacturer Ganfeng Lithium. It also has deals with junior miners for production that is yet to come on stream. Liontown Resources will supply Tesla with lithium spodumene concentrate from its Kathleen Valley project, and Core Lithium is open to further dialogue with Tesla after negotiations collapsed in October 2022.
It’s important to note that Tesla does not rely solely on lithium producers for its supply chain. The EV maker works with battery makers such as Panasonic and CATL, which in turn collaborate with other chemical companies that secure their own lithium deals.
Although the cost of lithium has been rising due to inflation and price hikes for raw materials, it is not the only factor driving the cost of batteries. The supply chain is complex, and extracting, processing, and qualifying lithium for use in EVs is a challenge.
While Tesla has acquired the rights to lithium-rich clay deposits in Nevada, it is unlikely that the company will become a miner due to the challenges and resources required to produce consistent quality at a reasonable cost. However, OEMs are realizing the need to build up EV supply chains from scratch, and automotive OEMs that are making EVs will have to become miners. The top three lithium producers by market cap are US-based Albemarle, Chile’s SQM, and Chinese company Ganfeng.
Source Credits: Bloomberg, Investing, Reuters, EV Wire