According to data from Adamas Intelligence, Tesla went Pac-Man on lithium in 2020. This is actually to be expected, as Tesla was the leading seller of electric vehicles by a wide margin.
The email noted that in 2020, Tesla deployed 18,700 tonnes of LCE (lithium carbonate equivalent) onto roads globally in the batteries of its newly sold EVs. This amount of lithium was more than the following four EV automakers used combined: BYD, Volkswagen, Renault, and Audi.
The data reflected that, in total, 67% of Tesla’s lithium consumption in 2020 was driven by the Model 3. The Model Y ate up 17%, and the remaining 16% of Tesla’s lithium consumption was split up between the Models S and X. If you look at the regional data, 47% of Tesla’s lithium consumption last year was in the Americas. The Asia-Pacific region ate up 34% and Europe took 19%.
During the first three quarters of 2020, all of Tesla’s lithium consumption was in the form of lithium hydroxide, according to the data. The release of the made-in-China Model 3 Standard Range vehicles that are powered by LFP cells from CATL changed that statistic in the final quarter — dropping the 100% share down to 84%.
Sichuan Yahua Will Double Lithium Output
Proactive Investors noted that Sichuan Yahua, which is a supplier of Tesla’s and also Core Lithium’s largest shareholder, recently announced that it would double its lithium output. Core and Yahua signed a binding offtake agreement for Core to supply 75,000 tonnes per annum of lithium spodumene concentrate.
The company noted that it planned to invest to increase the output of its Yaan plant from 20,000 tonnes per annum (tpa) to 50,000 tpa of battery-grade lithium hydroxide. In December 2020, Yahua and Tesla signed an agreement for Tesla to purchase $630 million to $880 million of battery-grade lithium hydroxide over a period of five years.
Core can help with this by meeting a significant portion of Yahua’s lithium concentrate supply requirements for the Yaan plant. Both signed the agreement for Core to supply 75,000 tpa of lithium spodumene concentrate.
Global Demand For Lithium & The Future Of Lithium
Proactive Investors pointed out that Core is the most advanced new Australian lithium developer, leading the supply of new global lithium production during a time when the global demand is accelerating. Core’s 100% owned Finniss Project is one of the most capital-efficient lithium projects in Australia, the article emphasized. The fact that the demand for lithium is accelerating leads to this next thought from Data Center Dynamics, which published an article focused on understanding the future of lithium.
The fact is that the world will need a lot of lithium if data centers plan to look to batteries for UPS systems, microgrids, and a more resilient grid and vehicles increasingly electrify. Currently, the lithium market is still a little bouncy — filled with boom and bust cycles, regional power drama, and constant conflicting reports on future demand. Predicting what the industry should expect is a bit tricky. BloombergNEF’s battery metals analyst, Sharon Mustri, shared her thoughts in this article.
“So, up until around 2015, lithium was a chemical used mostly for other things that weren’t batteries,” she explained. “And then the market realized, like, ‘Well, actually, electric vehicles and energy storage are going to be very important, and this is our main growth market.’ So they started focusing on battery-grade chemicals, and shifting all of their mindset and strategy to meet the demand coming from those markets.
“Prices began to rocket, with lithium producers adding more capacity, raising money, and building new mines. And then that led to the market realizing a bit after the fact that they had overbuilt and there was a bit of excess capacity. So prices came down, from a peak in 2017.”
Mustri noted that as this steady decline continued for years, suddenly Covid hit and almost all of the markets suffered under the pandemic — including the lithium market. Some prices reached their costs and this caused some producers to close down their mines, cut back on production, and delay expansion projects.
However, this could be seen as a good thing, as it helped the market stabilize.
She pointed out that this decade there is an estimate of around an 8× growth in the lithium market and Tesla predicted around 15 times higher than that growth estimate. She pointed out that both numbers could be wrong 9 years from now.
21st Century Gold Rush
As the world installs more and more wind power and solar power, as well as putting millions more electric vehicles on the road, all supported by lithium-ion batteries, I think that Tesla’s lithium consumption is just the start of what I call the 21st Century Gold Rush.
I’ve written about this before and I do believe we are about to enter into a situation that mirrors both the 1848 gold rush and the 1859 birth of the oil industry. Tesla’s Pac-Man style of consuming lithium is just the beginning, and fairly visible marker of this rush.
It was pointed out previously that Tesla’s real money may not lie in its vehicles, but in its battery business. We shall see.
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