Tesla's Model 3 Launch: Where Will The Lithium Come From?

Juan Carlos Zuleta profile picture
Juan Carlos Zuleta
1.81K Followers

Summary

  • In 2014, Tesla announced it would produce 500,000 EVs by 2020, but a few months ago said that this target will be met in 2018 and doubled for 2020.
  • Bloomberg has depicted in a chart the evolution of Tesla sales in 2013-2016, including a projection for 2017-2018, with emphasis on the launch of the Model 3.
  • In this article, the actual numbers Bloomberg utilized to make its chart are estimated to find out how much lithium Tesla will require for 2017-2018.
  • A breakdown of global demand for and supply of lithium for 2016-2018 is presented to see where the lithium needed by Tesla beginning next July will come from.
  • It’s demonstrated that not only Panasonic, Tesla’s supplier of Li-ion batteries, but also Sumitomo, Panasonic’s supplier of cathode material, may have reasons to worry about lithium in 2017-2018.

When announcing the construction of a new Lithium-ion battery Gigafactory in Nevada some years ago, Elon Musk said that Tesla Inc. (TSLA) was to produce there enough batteries to power half a million electric cars by 2020.

This projection has since been significantly modified. Last year Tesla indicated that they will produce 500,000 EVs by 2018 and 1 million such cars by 2020. There are still some questions as to whether this will imply doubling the size and/or cost of the Gigafactory, whether the Fremont plant in California will have to be expanded as well to take care of this new objective, or whether, under the new plan, the target set for stationary energy storage will also need to be duplicated.

Regardless of those considerations, though, Tesla’s CEO seems to be serious about launching production of the Model 3 next July to ramp up manufacturing thereafter and put into effect the “Lithium Revolution” in the world.

In the following chart, Bloomberg depicts the evolution of Tesla sales between 2013 and 2016, including a projection for the period 2017 2018.

Figure 1

In order to know what this “unfathomable launch” would imply for lithium, we need the actual numbers Bloomberg utilized to make its chart. Since these data are not available, we can proceed to estimate them visually, under two broad guidelines suggested in the Bloomberg chart: i) Model 3 alone tops 350,000 cars in 2018, and ii) all three models comprise 500,000 production units the same year. The results of this exercise are presented in Table 1. Note that I used official Tesla numbers from 3Q2012 to 1Q2017 and projections for quantities thereafter.

Table 1

Actual and Projected Global Production

3Q2012 – 4Q2018

Source: Tesla and Bloomberg.

For reasons of completeness and comparison, in Figure 2, I replicate the Bloomberg chart. See how

This article was written by

Juan Carlos Zuleta profile picture
1.81K Followers
Juan Carlos Zuleta is an economist. He holds a master's degree in Agricultural and Applied Economics from the University of Minnesota and did Ph.D. studies in Economics at the New School for Social Research. Since 1992 he has published a number of articles on the economics of lithium. Due to his contributions to EV World.Com, Industrial Minerals and Seeking Alpha.Com during the period 2008-2009, Juan Carlos was invited to participate as a speaker at both the inaugural Lithium Supply & Markets Conference (LS&M) held in January 2009 in Santiago, Chile as well as the second LS&M Conference held in January 2010 in Las Vegas, USA.

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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