Tesla’s Battery Plans Threaten Lithium Miners

Commodities | Sep 25 2020

Tesla has ushered in a new era for electric vehicle battery technology that could shake up the materials supply chain.

-Battery improvement to reduce lithium usage
-New technique to extract lithium from clay flagged
-Excess lithium inventory unlikely to dissipate soon


By Eva Brocklehurst

How long before Tesla electric vehicles (EVs) are commonly seen on every suburban street? Not that long according to the company, which has outlined plans to make electric vehicles more accessible.

Tesla has ushered in a new era in battery technology, planning to increase the width of a cell through a technique which overcomes thermal issues. Thicker cells will be more efficient and cheaper, and cheaper batteries should lead to higher demand.

The company considers battery cells are the main limiting factor for growth in EVs and is looking to re-jig the manufacturing process to allow Tesla to maintain its industry-leading cost base.

UBS believes this will mean current third-party cell providers experience a lower market share in Tesla EVs after 2022. The improvement in battery technology will support EV sales in the longer term but also reduce lithium usage and production costs.

To UBS, the company's industrialisation of battery production should flow up the supply chain and provide reduced processing costs for cathodes and upstream metals. While this aggressive move by Tesla will reduce long-term supply from other battery producers, the broker believes the changes in the industry structure could also be of benefit.

JPMorgan has no doubt the investment by Tesla and other EV manufacturers will eventually filter down to lithium miners and stimulate supply but, given the underperformance of new battery grade projects over the past decade, is cautious about the ramp-up profile. The demand that could be envisaged in the long-term is difficult to measure but, in any case, the broker assesses the market remains well supplied in the short term.

Technology Developments

Changes in the design increase the range of the batteries but also reduce the amount of materials used, and Tesla aims to make recycling more efficient and lower the need for fresh material over time.

Lithium remains the preferred metal for ion transport but other materials will be re-engineered to allow for greater use of nickel. Thicker batteries will have a 16% addition in range that implies the per kilowatt hour consumption of lithium will likely decrease.

To maximise nickel in batteries, which ultimately means all lithium would be lithium hydroxide, is likely to raise the cost for brine producers, Morgan Stanley points out, as these typically produce carbonate that will then need to be converted.

A new technology to overcome silicon expansion issues was also highlighted by Tesla. Whether a 100% silicon anode has been developed was not clear although the broker assesses this would mean increasingly lower graphite use.

Lithium From Clay

A new technique to extract lithium from clay using table salt was flagged, with production costs lowered by around -33% and a reduction in harmful waste product. However, Morgan Stanley notes this appears to be a pilot and it will take some time to be commercialised. The broker is also unsure of how many global deposits there are in clay and whether this can be scalable.

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