New business

Tesla is considering a new venture

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Tesla has new plans to reduce the costs of its lithium-ion batteries.

Ronny Hartmann/AFP via Getty Images

Automakers around the world are scrambling to secure raw materials to increase the capacity of electric vehicle batteries.

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has its own EV battery supply chain plans. It enters a new part of the battery supply chain which is a license to print money, according to CEO Elon Musk.

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the potential new business is lithium refining. The company is proposing a new facility in Texas to produce lithium hydroxide, a key component of higher-performance lithium-ion batteries, according to a recently made permit application, reported by Bloomberg.

The refinery facility is “the first of its kind in North America,” the application reads. Most lithium ore comes from Australia and South America and ends up being refined in China.

Refined lithium prices have risen from under $6,000 per metric ton to over $71,000 per metric ton in recent years. Rising lithium prices added very roughly $2,000 to the price of an average electric vehicle over this period. The lack of refining capacity and local refining capacity is why Tesla is considering the move.

Tesla (ticker: TSLA) did not respond to a request for comment on the project. Its application indicates that construction could begin in 2022 and production would begin in 2024.

The project looks like a smart move given how Musk feels about the refinement. “So lithium actually is. . . very common…all over the place, but you have to refine the lithium into lithium carbonate and battery-grade lithium hydroxide, which has to be extremely high purity,” Musk explained during the second round earnings conference call. quarter of the company. “There are like software margins in the processing of lithium at the moment. So I would really like to encourage, once again, entrepreneurs to enter the field of lithium refining. You can not lose. It’s a license to print money.

Traditional automakers also want to make a lot more electric vehicles. Both

Ford engine

(F) and

General Engines

(GM) wants to sell about 2 million electric vehicles a year each by 2025 or 2026. GM and Ford are investing billions in domestic battery capacity. GM has also partnered with

POSCO Chemicals

(003670.Korea) to build what amounts to a battery parts factory in the US The entire automotive industry is vertically integrating in battery supply.

Tesla seems to be the first to get into lithium refining. It probably won’t be the last.

Investors seem intrigued. Tesla stock is up 1.3% in premarket trading on Friday. This is a significant jump, but the overall market is higher.



Dow Jones Industrial Average

futures are up 0.9% and 0.8%, respectively.

Write to Al Root at [email protected]