Tesla Motors to drive Growth in Graphite
September 1, 2015
Commodities have taken it on the chin with this latest deflation wave spreading around the Globe, but many commodities have unique characteristics that can make them long term strategic investments. Graphite prices have languished in the face of a strong US dollar, the slowdown in China and the lack of economic growth in the US/Europe/Japan, particularly as it relates to the steel industry..
However Graphite has strong growth potential in the tech, auto and electrical energy markets. It is the main component that makes up the anode of the Lithium ion battery used in smart phones, laptops and pretty much all portable technology. Society continues to mobilize so this sector will continue to see growth.
Where the real growth story begins is in two other sectors where Tesla Motors (NASDAQ:TSLA) is a market leader.
Tesla is well known for their high quality electric cars and these cars use a lot of Lithium ion batteries, hence graphite. Electric cars are not going to take over any time soon, but just small growth can have a big impact on graphite.
Tesla delivered 10,030 cars in Q1 of 2015, a 55% increase over Q1 2014 and in Q2 2015 it was 11,507 up 52% from Q2 2014. They have very strong growth and have an ambitious goal with a annual sales target of 500,000 cars.
To give you an idea how that relates to graphite - it would require four or six new graphite mines.
Perhaps 500,000 cars sounds like a lot but it is only 1% of the annual new car market. And keep in mind we are talking only one car company.
Tesla produces Battery only cars- but add in Hybrids that use electric and internal combustion the battery demand is much more. According to the Electric Drive Transportation Association, end of July YTD a total 350,688 electric cars including hybrids have been sold in the U.S. alone
The electric car market in China is probably bigger than the U.S. just depending what you count as an electric car.
That aside Tesla will also drive demand in home power or off grid battery applications. This year they announced their new Powerwall home battery that greatly brings down the cost of storing Grid or Solar power. Certainly it is significantly bringing down the initial cost of a battery $3,000 for the 7 kWh and $3,500 for 10 kWh.
During Tesla's Q1 earnings call, CEO Elon Musk just announced that the company has so far taken 38,000 reservations for its Powerwall home battery. "The response has been overwhelming. Like, crazy," Musk said
Since then Tesla has announced two collaboration deals with Sunrun and LichtBlick. Sunrun is the largest dedicated residential solar company in the U.S. and LichtBlick is an energy and IT company. In Germany, over one million people - the "LichtBlickers" - already set store by the pure energy of the pioneer and market leader for green electricity and gas.
Tesla is starting construction of their battery Gigafactory with planned production for 2017. Before too long Tesla will have to negotiate an off take agreement with somebody to source graphite to accommodate the growth of Tesla and their Gigafactory.
