The world's leading EV is angling to get into the lithium refining game.
In a letter to the Texas Comptroller’s Office, Tesla said it is “evaluating the possible development of a battery-grade lithium hydroxide refining facility” in the state in order to supply its own battery factories with the mineral critical for battery-making. Prices of lithium, as well as of other minerals needed for the energy transition, have skyrocketed in recent years.
Getting into lithium refining has been on the mind of Tesla CEO and founder Elon Musk for a while. In April, he tweeted that the “price of lithium has gone to insane levels” and that Tesla “might actually have to get into the mining [and] refining directly at scale” if things do not improve. On a company earnings call in July, he encouraged entrepreneurs to explore lithium refining and described it as a “license to print money,” given the dearth of capacity.
If the company’s application is approved and the facility gets built, it would be “the first of its kind in North America,” Tesla said. Construction on the facility could begin as soon as the fourth quarter of this year, and could be ready for commercial operations by the end of 2024, the company added.
While Tesla explicitly stated that it is still evaluating the project’s feasibility and it remains in very early stages, the application represents the company’s attempt to get the state to offer a break on local property taxes for the potential plant. Tesla is evaluating a site in Nueces County, Texas, though the company said in the letter that it is also looking at one in Louisiana. The only necessity, Tesla said, is Gulf Coast shipping channel access.
Tesla certainly is not alone in prioritizing lithium access. As legacy automakers crowd into the EV market that Tesla has dominated for more than a decade, securing battery supplies has been top of mind industrywide.
In light of Ford’s goal of building 2 million EVs per year by the end of 2026, the company made a number of agreements in July to buy raw materials for its batteries. The bulk of these are with Chinese and Korean companies, including one particularly prominent deal with the Chinese company Contemporary Amperex Technology Co. Limited, the largest battery-pack supplier in the world. A mere week later, GM followed suit with its own slew of agreements with its own suppliers.
The lack of U.S. representation among these large suppliers of battery raw materials underscores the fact that the country lacks a domestic supply chain for battery materials and components that major automakers are increasingly demanding. While there are small mining operations, refining (especially for lithium) currently happens exclusively overseas.
But that may be about to change, and not just because Tesla is weighing whether to enter the refinery fray. In May, the Biden administration announced investments of nearly $3.2 billion in lithium-ion battery manufacturing, processing and recycling on U.S. soil. Meanwhile, the Inflation Reduction Act also included an influx of cash for the sector. The law also requires automakers to source a growing percentage of their domestic battery components and materials for their EVs if they want the vehicles to qualify them to qualify for tax credits.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE