There’s only one thing standing between Tesla and world domination—the global supply of lithium. And that’s good news for lithium producers.
When Tesla (ticker: TSLA) held its battery day on Sept. 22, CEO Elon Musk laid out plans to build massive amounts of Tesla-owned battery capacity—enough to make about 30 million electric vehicles by the end of the decade, up from roughly 500,000 in 2020.
Such an enormous increase depends upon mass acceptance of electric vehicles over traditional combustion-engine ones and the creation of the infrastructure necessary to fuel that many EVs. But it will also require a massive amount of lithium to make the batteries those cars will run on—a massive challenge in its own right.
Right now, the world mines roughly 400,000 tons of lithium a year, enough to power 2 million to 3 million electric vehicles, though only a third of that goes to EVs right now. That number will have to increase perhaps as much as tenfold to meet Musk’s goal, and that doesn’t take into account other auto makers.
Tesla took one step to ensure part of its lithium needs by signing a sales agreement with
(PLL) this past week. Piedmont stock more than doubled after news of the sales agreement with Tesla broke—as well it should have. The deal guarantees Tesla will buy about one-third of the startup’s production for up to 10 years. Though Piedmont’s mine isn’t operational yet, it expects to deliver product to Tesla by 2022 or 2023.
(LTHM) should be considered among the potential winners of the coming EV boom.
Mining lithium isn’t easy—or easy to grasp. The supply chain is complicated. Lithium producers, for the most part, don’t ship pure metal. Instead, they sell products