Wednesday 9 August 2017

Elon Musk's Lithium Race Ludicrous Mode: "We're Also Thinking Hard About, Where Do We Put Tesla Gigafactories 3, 4, 5 and 6?"

Elon Musk has revealed a few very interesting details about Tesla Model 3, upcoming Gigafactories and the future for lithium batteries during Tesla Motors, Inc. Second Quater 2017 Financial Results Q&A conference call. Elon Musk is counting Tesla Buffalo Solar Panel and Solar Glass production facility as Tesla Gigafactory number 2 and is talking about Gigafactories 3,4,5 and 6!

The following extracts are from Seeking Alpha transcript:

"Elon Reeve Musk - Tesla, Inc.
Yes. Just on the Buffalo front – I really want to emphasize, we expect the Buffalo Gigafactory to be a powerhouse of solar panel and solar glass tile output. It is going be a kick-ass facility. We have made that commitment to the State of New York. We are going to keep that commitment.
And then, we're also thinking hard about, where do we put Gigafactorys three, four, five and six? We expect to keep the majority of our production in the U.S., but it's, obviously, going to make sense to establish a Gigafactory in China and Europe to serve the markets there, because it's not to build cars (29:23) in California and truck them halfway around the world, particularly when you're trying to make things as affordable as possible – that really hurts.
We really want to make our cars as affordable as possible. And so that does require some amount of local market production, particularly for the mass market vehicles in order to make it as accessible as possible.
So we're thinking hard about that. I think we'll have some announcements on at least a few of those locations before the end of the year, but we don't expect to spend significant money on them. It's just identifying the location, doing the long-lead time stuff, the permits, the planning. This doesn't cost a lot of money. It's only when you really start moving dirt and putting up concrete and steel and buying equipment that the big money starts to be required."

Simon Moores from Benchmark Mineral Intelligence is following 17 Lithium Megafactories, it looks like we can add another 4 Gigafactories from Tesla. Some of them will be announced this year. I guess that these Gigafactories ideally will produce lithium batteries and electric cars together in the true vertically integrated line of EV business. Needless to say that lithium supply chains are not ready for such expansion. Locations of all these Tesla Gigafactories are still unknown, but now Elon Musk is talking about China and Europe. He was mentioning before another Gigafcatory in the US in the future. Will one be destined for the South America in this case and can we take the Tesla's visit to Argentina this spring as an early indication? We will have more information by the end of this year. Lithium is the magic metal at the very heart of this Energy rEVolution.

Insiders Are Buying Into International Lithium As Ganfeng Moves Mariana JV Forward In Argentina.


Please read legal disclaimer. There is no investment advice on this blog. Always consult a qualified financial adviser before any investment decisions. DYOR.

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ElectTrek reports that "salt on the salad'": this is how Elon Musk has described lithium before - must be very important for Tesla's digestive system after all. I am writing here extensively about the coming control of the Lithium supply by Chinese companies who are very aggressively buying all the best lithium projects worldwide. It is very difficult to pretend anymore that any lithium will be coming from any signed by Tesla agreements with some junior miners in the nearest future. Lithium cathode is still produced by Panasonic for Tesla Gigafactory. Read more.

Another part of this story is the rising price of lithium in China again. Last year we have seen only 14% rise in lithium supply and prices have increased by 74%. In December, Benchmark Minerals has reported that LCE (Lithium Carbonate Equivalent) was priced below $15k/T and Lithium Hydroxide (the particular lithium based chemical which is used in Tesla batteries) was around $18k/T. Last week I have received reports that in Shanghai LCE was priced at $18k/T and Lithium Hydroxide was at $22k/T. Today there are reports that LCE is already pushing $19k/T. It is all happening just before 4 major Lithium batteries Megafactories will be coming online in China this year and Tesla will move into the mass market stage with the production launch of Tesla Model 3 in July.

As you know, I have been preaching for years that security of lithium supply will be the most important factor determining the competitive advantage among different producers of critical raw materials for the Energy rEVolution. This Lithium Race will have the very far-reaching geopolitical implications. Now it looks like that Tesla is realizing that there is no secure supply of lithium for its massive expansion of operations from the underneath of Gigafactory floor in Nevada. Even if Panasonic is producing cathode for lithium cells which are made at Tesla Gigafactory in Nevada the supply chain is going all over the globe and back to China.

The real test to the market and supply chains for Energy rEVolution will come with the coming tide of Electric Cars and the following tsunami of Energy Storage. Bloomberg has recently reported that there will be more than 120 models of electric cars by 2020 and you should not be surprised as we have discussed here before that there are more than 70 models of electric cars on sale in China already. The next few years will determine who will have the keys to the new Energy rEVolution and control the supply chains. Hungry Dragons are flying high already and mostly in China, the question remains who and how will feed them without fear of being burnt in the process. 

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