Can Tesla Motors Inc (TSLA) Get Enough Lithium for its Gigafactory?


Tesla Motors Inc (NASDAQ:TSLA) recently disclosed its plan of building, what it’s calling the ‘Gigafactory’, which will enable Can Tesla Motors Inc (TSLA) to bring down the costs of the batteries that goes in its cars and increase production. If it works out, it will decrease the cost of a Tesla Motors Inc (NASDAQ:TSLA)’S car substantially, enabling it to target the mass market.

Though the plan looks good on paper, the real concern lies in whether there is enough Lithium on earth to match the increase in demand, or more accurately, whether Tesla Motors Inc (NASDAQ:TSLA) will be able to get enough lithium for making it’s car batteries? That was the topic of discussion between Alix Steel and Cory Johnson on Bloomberg.

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“So we take a look at the supply and demand dynamics that we are looking at over the next few years. Right now we are ok, demand is around 150,000 tonnes, production is 250,000 tonnes. You fast forward 2015 though, you are looking at a possible supply of 300,000 tonnes and possible demand of 480,000 tonnes. That’s a 7 to 10% annual growth for demand, so, we would not have enough lithium as the project start right now,” Steel said.

Steel also highlighted the fact that prices of Lithium would be rising and there is no way consumers can hedge the price increases in future as Lithium is not traded in forward markets. She also revealed that there are 13 million tonnes of proven reserves of Lithium on earth, but it takes a lot of time to extract it.

“Yes, if they can get the price down enough and that is really where its key, so Tesla Motors Inc (NASDAQ:TSLA)‘s goal is to make the price to about $200 per kilowatt hour and what that would do, it basically measures the amount of energy you can store in the battery. The cheaper it is the bigger your battery can be, the more energy you can put in there, the longer you can drive on 1 Tesla Motors Inc (NASDAQ:TSLA) charge,” Steel added.

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