Tesla considers building own lithium refinery in Texas

Not a day goes by without lithium or Tesla being in the news, Tesla is not alone in the struggle to secure raw materials for battery production. The supply itself is not an issue, apparently we have plenty of lithium around the world. The issues are more geo-political than technical, there are serious ethical issues surrounding many of the lithium mines as well.

For the global auto industry to achieve the de-carbonization goals set by the governments it will take a ton of effort, and millions of tons of lithium. The US is struggling with processing of the raw material, Canada is about to start supplying global automakers and China - well, nobody really knows what is China’s next move.

With all that on the table, Tesla is not taking any more chances, it needs to scale up its production if it is serious about delivering on its promises. The only way to support its production of Semi, Cybertruck and increased numbers of its passenger EVs is to take control of strategic components supplies - lithium included.

The company has submitted an application to the Texas Comptroller’s Office to evaluate a lithium hydroxide refining facility on the Gulf Coast. The proposed refinery would develop battery grade lithium hydroxide and would process raw ore material into a production usable state.

In the application, Tesla states that this is the very first such refinery in the US and if approved, the construction of the project would begin before the end of this year. Production of lithium is planned to begin in 2024.

This year we have witnessed prices of electric cars jumping up every other month. Lithium is not the only one responsible for that but with its price rocketing by 120% this year alone, it translated to a $1,000 price bump per car. It makes a lot of sense for automakers to try and take control over it.

Majority of lithium deposits are in South America - Chile, Bolivia and Argentina have as much as 85% of global lithium reserves. But it is China who controls the refining with 75% of global raw lithium processed in the country. It’s neither a smart business approach nor a safe one to have China in charge of it.

If Tesla goes ahead with lithium refining on American soil, it will be able to take advantage of huge government incentives introduced together with the EV tax credit. There is $30 billion available in production tax credits for accelerating output of EV battery manufacturing, there is $10 billion tax credit for increasing EV manufacturing as well.

On top of manufacturing tax credits, there are $2 billion in grants and $20 billion in loans available for building of new EV and battery factories. There are additional tax credits and grants available for states and municipalities who engage in clean technology.

It seems there has never been a better time for lithium mining and refining, Elon Musk has been saying for a while that it is simply a license to print money. If the company actually goes ahead with this, it'll be good news for shareholders and good news for customers - eventually.

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