Meditations On The Future Of Tesla Energy rEVolution: Next Brilliant Move For Elon Musk After Kidman Lithium Deal Can Be Buying Stake In SQM.
I would like to congratulate Kidman Resources and Elon Musk at Tesla with this historical deal in our Lithium Universe. As we have discussed multiple times, I would really urge Elon Musk to secure Lithium Supply for Tesla Energy rEVolution and focus on Model 3 and Model Y, leaving autopilot efforts aside and allow our society to grow organically into it. This way, in my very personal humble option, Tesla will blow all competition out of the water for years ahead and sail into its Electrifying future. Hopefully, we all can follow.
The main problem is not with autopilot technology, which still has to improve by the way, but with people and every single incident with Tesla will be blown out if proportions hurting Elon Musk personally and Tesla brand. He can sell 500,000 Electric Tesla Model 3 per year “full autopilot hardware ready” and even up to 1,000,000 of Model Y per year without making autopilot the main selling point.
All Teslas are the best cars in their categories which just happen to be electric. On the other hand, any constraints in Tesla’s ability to gear up production of Model 3 and launch Model Y will define the Tesla’s future now. Wall Street still matters, whether Elon Musk likes it or not, if Tesla would like to have access to the capital in the long run. To avoid the bullying from banksters Elon Musk has to make up for his promises with Tesla Model 3 production numbers first. More deliveries mean positive cash flow and launch Tesla Model Y will be possible, which will eat the market share of the most lucrative sector for the ICE Age automakers.
Now let’s stop for a moment and look at the main chocking points and bottlenecks in the Tesla’s supply chain which brings the main strategic risks for this vision for our Energy Security future in the West. My strong belief is that it will not be the ability to develop the best autopilot or any other part of EV technology (arguably Tesla has already the best technology and in the worst case here new tech solutions can be bought). The main chocking point for Tesla will be the Security of Lithium Supply.
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Elon Musk loves to go down to the level of physics with every problem. This is it - Lithium is the element all Tesla Energy rEVolution is based upon. Disruption of $12 Trillion markets of Energy and Transportation is based on $3 Billon Lithium market by sales in 2017.
"Lacking any clear government strategy to support the transition to the Post Carbon Economy in the West apart from very brave experiments with "Clean Coal" in the US and "Clean DIEsel" in Europe, companies like Tesla have to compete for crucial supply chains for materials for the Next Industrial rEVolution with the state-level military machine "Made in China". China is already the largest market for EVs and the prize will be the total domination in this sector on the global scale."
"We can have very good partners, but we cannot rely upon that totally different social system will be always there for us to supply the critical material for the West. When last time have you read Karl Marx manifesto? Trade Wars have been started already."
This is why this deal is so significant for Elon Musk and for Tesla first of all. It is the most important first real step for Tesla to secure its lithium supply, but it is very small: Tesla will have 5,000 Lithium Hydroxide LCE per year offtake. Next brilliant move for Elon Musk can be to buy the stake in SQM. Chinese Tianqi is rumored being closing on this deal again, but it can change all geopolitical balance of power in the Post Carbon World after the ICE Oil Age if Elon Musk can pull it off. Some people are already concerned with growing power of China to control lithium market and Chile was even considering to block Tianqi deal to buy SQM stake.
Elon Musk move to buy SQM stake can address all these concerns in Chile and Tesla will get its own vertically integrated ecosystem with secure lithium supply which is already in production in Chile from brine in Atacama desert and now allowed to grow further, plus upcoming diversification with Kidman Resources JV in Australia in hard rock mining where SQM has 50% stake in the project and Lithium Americas brine development in Argentina where SQM has 50% stake in the JV project as well.
Effectively Tesla can cut so-called Chinese Lithium Converters - middlemen like Ganfeng Lithium and Tianqi and secure its own strategic supply of lithium. Then Elon Musk's dream about raw materials coming into Tesla Gigafactories and Tesla Electric Cars coming out will be very close to materialization on the literally global scale.
Ganfeng and Tianqi will be fine as well. We have to produce 100 million tonnes of Lithium LCE by 2050 just to electrify our transportation and all energy storage will be on top of it, there is enough place for everybody: our starting point is 220,000 Lithium LCE produced in 2017.
But only strong soft power of peace can withstand the kiss of the Dragon. We are talking here about the geopolitical map of the post ICE Age world when Oil power will be greatly diminished and trillions in stranded assets will the price to be paid for the years of the bloody domination by the West in the 20th century. We still can make it and Elon Musk can lead the way as usual.
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Disclosure: I am/we are long TRRXF.