Tesla Taking Up the Entire Lithium Market
The rise of the electric car is synonymous with the rise of the lithium-ion battery. These batteries, which can carry a much more efficient charge than any previous type of battery, are what makes all-electric vehicles economically possible. They are the driving force behind plug-in hybrids, the pioneering Chevy Volt and more recently the upstart poster child for all-electric cars, Tesla Motors.
As one might expect, production of lithium-ion batteries requires a fair amount of lithium. This white metal has been on the technological radar for a while, primarily for cell phone and computer batteries. It is only recently, however, that demand has spiked due to the production of efficient and increasingly affordable battery-powered vehicles. The average Tesla EV battery requires as much lithium as 10,000 smartphones states a Wall Street Journal article.
The first few Tesla models were considered elite luxury cars. At price tags of $50,000 or more, they were not economical for an already poor market. The incentives to buy expensive hybrids and all-electric vehicles was and still is hampered by continuous low gas prices. Tesla, spurred by the success of its original models, is preparing to unveil the Model 3, which promises to be a car that hits a much more affordable price point of about $35,000. At this price, the average consumer could probably afford the car, especially after tax incentives are factored in. Online title loans may be the ticket to getting this advanced car sooner. An affordable model will allow Tesla to step into a mass market that does not yet have much competition from major producers like Toyota that have turned their attention instead to hydrogen vehicles.
The initial orders for the Model 3 are a good indicator of the possible incredible demand for what may be the best EV for its price ever to hit the market. Already over 400,000 orders have been placed for the new model. Tesla CEO, Elon Musk has indicated he wishes to be able to hit a 500,000 a year production mark for his vehicles. This is a very lofty goal considering that it would demand more lithium production than the world is currently capable of.
While the Earth’s crust contains a very healthy quantity of lithium, production of this light metal is hampered by several things. First, demand for lithium has spiked suddenly and rather unexpectedly with the explosion of battery production for electric cars. Second, lithium production is extremely concentrated and owned by a few mining conglomerates that operate primarily in Chile, Argentina and Australia. Production in the United States is very small by comparison and limited primarily to a single small mine in the Nevada desert.
Tapping larger lithium resources is a risky investment for many mining companies. Deeper reserves of lithium are known but cannot be economically extracted. Either mining technology and methods must improve or demand and price for lithium must rise so high that considerably more expensive operations would still be profitable.
Currently, most of the big names in mining aren’t willing to take the risk. The battery market is a rapidly evolving beast, and there is a great fear that even more efficient batteries could be invented that would no longer require lithium. If this occurs, the lithium market would take a nosedive.
At present, Tesla and lithium production are closely link in an intricate dance of supply and demand that may cause big changes in both the metal and the car markets. Investors and consumers alike would do well to keep on eye on this evolving relationship.