Tesla's Evolving Cobalt Nightmare

John Petersen profile picture
John Petersen


  • Long-range electric vehicles cannot be produced at relevant scale unless automakers have ready access to plentiful supplies of cheap high energy lithium-ion batteries.
  • All high energy lithium-ion batteries use more cobalt in their formulations than lithium.
  • While new lithium resources can be developed if prices are high enough, 94% of the world's cobalt is produced as a by-product of copper and nickel mining.
  • Without sustained increases in copper and nickel demand, the battery industry will not be able to obtain the cobalt it needs at anything approaching a reasonable price.
  • Without a miner miracle (pun intended), Tesla Motors' EV dream will soon become a cobalt nightmare.

Over the last 10 years, we've been deluged with news stories and investment analyses extolling the virtues of electric vehicles, or EVs, powered by high energy lithium-ion batteries. The stories pontificate on theoretical environmental benefits and speculate on how EVs could forever change the world's energy landscape. While the occasional realist questions the availability of enough lithium to satisfy soaring battery industry demand, everybody overlooks or ignores the more critical mineral constraint - cobalt.

It's a gargantuan challenge. A veritable Gigarisk!

This graph from BatteryUniversity summarizes the typical specific energies for nine different battery chemistries.

The six lithium-ion chemistries (orange columns) use varying amounts of lithium metal in their cathode and electrolyte formulations. While there is no single "right" value, a lithium-ion battery with perfect electrochemical efficiency would need 80 grams of lithium per kWh of capacity. Since perfection doesn't exist in the real world, the industry average is closer to 160 g/kWh.

According to Avicenne Energy, the lithium-ion battery industry used 118,000 metric tons of active cathode material batteries in 2014, which works out to an average of 2.4 kg/kWh. According to BatteryUniversity, LCO, NMC and NCA, the lithium-ion chemistries with the highest energy densities, all use cobalt in their cathodes. For LCO, cobalt represents 60% of cathode mass, about 1.44 kg/kWh. For NMC, cobalt represents about 15% of cathode mass, about 0.36 kg/kWh. For NCA, cobalt represents 9% of cathode mass, about 0.22 kg/kWh.

Avicenne expects global battery production to climb to about 135 GWh per year by 2025. Since Tesla (NASDAQ:TSLA), LG Chem (OTC:LGCEY), Foxconn, BYD (OTCPK:BYDDY) and Boston Power are all building new battery factories that will boost manufacturing capacity to over 150 GWh by 2020, Avicenne's forecast is probably conservative. For purposes of this article, however, I think conservative is best.

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John Petersen profile picture
I'm a lawyer and accountant who's devoted the last four decades to advising entrepreneurs on corporate finance, SEC registration and reporting, and corporate governance matters. All of my client projects have involved high levels of uncertainty, compressed timelines, and urgent financial needs that demanded unparalleled responsiveness. I know how to get major projects completed on time and within budget. I'm a 1979 graduate of the Notre Dame Law School and a 1976 graduate of the W.P. Carey School of Business at Arizona State University. I was admitted to the State Bar of Texas in 1980 and subsequently licensed to practice as a CPA in 1981. While I don't hold myself out as a practicing accountant, I regularly use my in-depth knowledge of accounting methods, processes, and procedures to offer nuts and bolts counsel to clients who need integrated advice on finance-driven legal matters.As general counsel for the C Change Group, I'm involved in all of that company's domestic and international initiatives.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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