Battery Day – Demand for Lithium Will Rise Sharply

Battery Day – Demand for Lithium Will Rise SharplySeptember 26, 2020 Dirk HarbeckeChairman bei Rock Tech LithiumTesla sets new goals for global e-mobilityInvestors and Tesla enthusiasts waited with great excitement for the “Battery Day” of the e-car pioneer. In the run-up, Elon Musk had fired up the mood on Twitter, announcing "many exciting things." But the Tesla boss disappointed expectations - the Tesla share price slumped by more than 15% in the following days. However, if you analyze Musk's statements a little more closely, they are groundbreaking - because Tesla is expanding the boundaries of e-mobility, with massive consequences for the lithium market.

This is especially true regarding three points:

Point #1Musk announced a car for $25,000, the equivalent of around 21,000€. For comparison: the cheapest ID.3 from Volkswagen is said to cost just under 30,000€, around $35,000. Tesla can only start this "price war" if the batteries become significantly cheaper.

The battery currently accounts for around 30% of the total cost of an e-car.

According to an analysis by battery specialist Cairn Energy Research, Tesla currently produces batteries at a price of around $120 per kilowatt hour. This means that Tesla’s cars are no longer far from cost parity with conventional burners.

In general, $100 per kilowatt hour is the mark from which the production costs of electric cars and gasoline or diesel cars are the same.

Tesla has far more ambitious plans and wants to cut the cost of batteries by more than half through a new design and production efficiency. At the same time, the battery range is to rise sharply. Tesla and other car companies, if they take heed, will only achieve significantly cheaper batteries if they get the costs of production under control through manufacturing efficiencies in cell design, cell factories, anode materials, cathode materials and cell vehicle integration. For overall costs, the price of battery raw materials is a relatively small component.

The cost parity at the latest should noticeably heat up the demand for electric cars. After all, in addition to range and charging options, the acquisition costs of e-cars play a decisive role. Wherever these have been reduced by subsidies, sales of battery-powered vehicles have jumped up in a big way - most recently in Germany. Here the number of new registrations has lately more than doubled despite the general sales crisis. Musk also mentioned what cost parity would mean for the demand for battery raw materials such as lithium - Tesla alone will double its previously planned lithium demand for the coming years! If the other car manufacturers follow suit, massive investments in the lithium sector will be indispensable.

Point #2Furthermore, Musk said that there is sufficient lithium for the US market in Nevada alone, where Tesla produces batteries.

I see this statement very critically! It may well be that large quantities of the alkali metal are stored in the desert state - but in very small concentrations. Therefore, it will be very difficult to extract lithium quickly and cheaply. So far, no one has been able to do this and lithium industry experts describe Musk's statements on this point as "at best aspirational." Experience shows that the development of such deposits takes eight to ten years. In another point of this statement, however, Musk shows the trend: a regionalization of production is becoming apparent - even for electric cars. This can already be seen in the construction of battery factories which are currently springing up out of the ground, especially in Europe, and will continue for raw materials.

Point #3Finally, Musk announced that Tesla wants to invest in lithium mining itself! This step is only logical. From the very beginning, Tesla has placed great emphasis on developing and producing the central components of its cars in-house. This applies to the hardware and software as well as to the batteries. The aim is to be as self-sufficient as possible.

European car manufacturers, on the other hand, have so far been completely dependent on South Korean and Chinese suppliers for batteries.

However, signs are emerging that the Europeans are changing their way of thinking. Volkswagen, Opel and Co. now want - in contrast to earlier announcements - to enter the production of battery cells themselves. Only the last step is now missing: complete control of the supply chain.

This starts with the extraction of the battery raw materials. Tesla once again leads the field here. However, it is only a question of time when the other car manufacturers will follow the pacemaker.