Tesla boss Elon Musk is giving himself a license to print money – by building a lithium plant in Texas. This is to start supplying refined lithium to the car manufacturer’s battery factory as early as the end of 2024. Thus Musk assures his company a strategic competitive advantage in a market that is overheated in the short and long term.
Lithium is a license to print money – Tesla CEO Elon Musk said this a long time ago. The American billionaire seems to want to take advantage of this self-awareness and is now planning to build a lithium refinery in Texas. This should provide Tesla with the necessary raw materials for electric car batteries and thus eliminate supply risks.
Various media reports about the application filed by Tesla on August 22 in the US state of Texas. According to this, the lithium refinery should “process raw materials into a form that can be used for battery production”.
Construction is scheduled to begin in the fourth quarter, with production beginning in late 2024. Texas offers location benefits such as lower property taxes and is also considered cheaper in terms of labor costs. The location of the factory is said to be on the Gulf Coast. From there, the refined lithium will be transported by rail and road to Tesla’s battery factories across the country.
German automakers rely on ownership and joint ventures
The rapid construction of the lithium plant could be a strategic competitive advantage for Tesla. Automakers around the world are currently scrambling to get access to the critical raw material for lithium. Recently, Volkswagen and Mercedes-Benz signed letters of intent in Canada.
Mercedes, for example, has a strategic partnership agreement with the company Rock Tech Lithium (WKN: A1XF0V, ISIN: CA77273P2017) announced, which should ensure up to 10,000 t of lithium hydroxide from 2026. In addition, Mercedes is involved in eight plants worldwide. VW plans to establish plants in Europe and North America.
The Anti-Inflation Act favors local supply chains
Elon Musk’s decision to locate in Texas may also be due to the Anti-Inflation Act recently passed by the US Congress. The law provides subsidies in the form of tax breaks for electric vehicles – but only if the necessary raw materials come from the United States or countries with which it has a trade agreement.
But it’s not just the new law that favors secure supply chains. The war in Ukraine and the growing rivalry between the US and China also speak in favor of a new political mindset towards reliable supply chains.
Lithium remains scarce in the short and long term
Lithium remains scarce in the short and medium term. 1 t of lithium hydroxide currently costs about 77,000 dollars in the market. Apart from the small depreciation, this price seems to be about to be reduced. In the long term, additional demand appears to be increasing. This is largely due to the planned electrification of road traffic in many countries.
The Federal Institute of Geosciences and Natural Resources (BGR) published a study in July, according to which it seems unlikely that global demand will be met in 2030. Even if all lithium projects planned and under construction went into production on time and demand growth was moderate only, the world would not have enough lithium at the beginning of the next decade, Michael Schmidt from BGR told “Handelsblatt” at the time.
All companies that are currently developing new deposits and will bring them to market in the near future will therefore benefit from the surge in lithium. This includes, for example, a Canadian survey company Lithium Resource & Technology Ltd. (CSE: FAT, FSE: F0R0, ISIN: CA3455101012).
Foremost Lithium is the only lithium company engaged in the development of six lithium hard rock projects in Manitoba, Canada. Preliminary, preliminary estimates indicate resources in the order of several million tonnes of lithium oxide (Li2O). The company wants to extract raw materials and then process them into battery-quality products.