Tesla’s Ambitions Impacting Demand For Lithium, Other Metals

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Tesla CEO Elon Musk said at the unveiling of the Model 3 that they would need to absorb the entire world’s lithium-ion production in order to produce half a million cars a year. After shaking up the auto industry with its battery-operated cars, the automaker is now reshaping the metals markets as well with its ambitions, says The Wall Street Journal.

Tesla will need a lot of lithium

Though Tesla is not the only consumer of lithium, its big orders are getting significant attention. The EV firm expects to sell 500,000 cars around the world by 2018 and one million vehicles by 2020. The rising demand for lithium can be partially attributed to the cheaper and affordable Model 3, which is half the price of the Model S. According to Goldman Sachs’ estimates, one Model S battery contains more lithium than 10,000 smartphones.

According to Tesla, it has received nearly 400,000 orders for the Model 3 already. These orders will require a lot of lithium. With its factory in Nevada, the electric car maker wants to become the world’s largest lithium-ion battery producer.

“In order to produce half a million cars a year…we would basically need to absorb the entire world’s lithium-ion production,” Musk said while unveiling the Model 3.

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Rising demand for lithium

Lithium is a lightweight metal that’s also called “white petroleum.” It’s used for making lithium-ion batteries which power EVs. According to a recent information from data provider Benchmark Mineral Intelligence, in comparison to the average price in 2015, the price of lithium carbonate rose 47% in the first quarter. According to the firm, when most other metals and commodities were in the doldrums in 2015, the price of lithium rose 28%.

Also there is no sign of a reduction in demand for the lightweight material, which could could triple by 2025 to 570,000 tons, said Goldman Sachs. The firm also states that demand will rise mostly because of smartphone and electric car applications. According to Pure Energy Minerals, a Vancouver-based resources company, the demand of lithium is about 175,000 tons a year.

Lithium to badly impact demand for palladium and platinum

According to analysts, demand for palladium and platinum can decrease as they have no use in battery-powered EVs. Widespread use of battery-powered cars could affect platinum and palladium badly, said Michael Widmer, a metals strategist with Bank of America Merrill Lynch.

However, research firm Edmunds.com said less than 2% of the vehicles sold in the U.S. are battery-powered cars and hybrids, and hence, they remain a long distance from being called mainstream.