During its “battery day” last month, Tesla Inc. (NASDAQ:TSLA) invited executives of Livent and Albermarle, the two big lithium companies in the US, ahead of the plan to venture into lithium mining for its EV battery. Elon Musk told the executive that the electric carmaker was becoming their competitor.
Tesla planning to extract Lithium for its car batteries
Musk said that the company had acquired rights to a 10,000-acre mineral resource in Nevada, where it is expected to extract Lithium using table salt. He added that the company was planning to construct a lithium refinery in Texas to supply a new factory. Following the bombshell, Livent and Albermarle lost around $1.7 billion in market value the following day after their stocks plunged.
However, there has been skepticism from observers and insiders who don’t see Tesla posing a serious competitive threat to these established producers. According to insiders, Tesla’s plan is putting pressure on the industry to increase production.
Tesla wants lithium production to be increased
Tesla is looking to cut the cost of its batteries by almost half as it aims at producing a $25,000 EV that can compete with the large market of mid-range fossil fuel cars. The company targets around 20 million cars by 2030, and to reach this milestone, they will need 3 terawatts hours of batteries annually. According to Citigroup analysts, this means that the lithium industry has to grow eightfold to meet Tesla’s demand.
WoodMackenzie has indicated a need for an investment of $50 billion in the next 15 years in Lithium to meet battery demand. This is if the world wants to meet the Paris climate accord targets. However, producers have faced challenges in recent times as they have struggled to expand due to dropping prices. According to Benchmark Mineral Intelligence, lithium hydroxide, which Tesla uses, has seen its price fall over 20% over the past year. Without more investment, Tesla is at risk of being short of Lithium and could face a possible price increase in the next 10 years.