Tesla faces raw material reality with expanded Gigafactory

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Tesla opened its Gigafactory a few weeks ago to the surprising, if casual, announcement by Elon Musk that the Gigafactory will be three times the original 50GWh planned capacity.

The company explained that the lithium ion battery plant, through its dense layout which was designed through Computer Aided Design, has allowed it to significantly boost capacity to 150GWh. To make matters more challenging for its supply chain, Tesla expects to have 50GWh worth of operating capacity by 2018 – 35GWh of which is anticipated to be from cells made in the Nevada-based facility.

The real concern now is whether there will be enough raw material to fuel not only a 150GWh Gigafactory  but also the major growth that is being seen in China where at least 7 lithium ion megafactories are being built.

The answer is no.

At three times the size, Tesla will need to source 110,000 tpa of coated spherical graphite, 75,000 tonnes of lithium hydroxide, and 21,000 tonnes of cobalt. These are astonishing volumes, not only because they are for one customer, but because they will completely reshape battery raw material industries.

The company said they will be at 50GWh capacity by 2018, but in simple terms their suppliers will not be able meet this demand in such a short space of time which will slow the Gigafactory’s ramp up. Over a 5-7 year period there is little doubt that the investment presently being seen into graphite and lithium will result in the additional supply needed – both in terms of existing producers expansions and new greenfield operations.

Raw material impact

But major questions remain over whether this material will be available for the capacity expansion due to hit the market in the next 1-2 years.

Huge capacity expansions will be needed to take the carbon anode industry from 80,000 tonnes last year to the 250-300,000 tonnes needed by 2021.

The majority of these expansions are expected to come from flake graphite miners rather than synthetic graphite producers which are simply not installing the additional capacity due to higher costs.

Meanwhile, lithium continues to be in shortage and prices remain at levels up to 3-4 times higher than at the start of 2015.

New mines are being planned and significant expansions are announced – especially by Albemarle and FMC Lithium – there remains little doubt that the supply and demand balance will remain tight over the next four years.

When Tesla revealed the Gigafactory plan to build half a million vehicles a year, it raised a number of eyebrows because many people struggled to believe anyone could sell that many electric cars each year before 2020.

Today, with Model 3 pre-orders over 400,000 and Tesla Energy’s home and commercial battery packs to be integrated into the solar powered source acquired via SolarCity, the company’s biggest worry must now be (besides the $1.1bn cash it will need in Q3) on whether there will be enough supply of the vital ingredients that will allow it to change the world.

Because at the moment there is not enough capacity in the market nor is there enough in the pipeline of projects expected onstream in the next 5 years.

One thought on “Tesla faces raw material reality with expanded Gigafactory

  1. Apart from the sufficient supply of raw materials, even when they can get these raw materials, how about the logistics ? That will be quite a challenge as well.

    Elon can call me for advice on this 🙂

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