Tesla Seals New Lithium Supply Deal

  • General
  • September 28, 2020
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  • 4 minutes read
Photo credit: Tesla

Electric carmaker Tesla has announced that it’s entered into a binding agreement to purchase lithium ore mineral from Piedmont Lithium Limited, a publicly-traded lithium company that’s based out of Australia. The agreement between both companies is initially for a five-year period, in which Tesla has committed to purchasing roughly one-third of Piedmont’s annual output 160,000 tonnes of lithium ore mineral for each year as well as additional amounts that the electric carmaker has the option to request. The agreement is conditional on deliveries of the lithium ore beginning sometime between July 2022 and July 2023.

Piedmont says it expects the Tesla deal to generate between 10-20% of total revenues from its proposed lithium project for the initial five-year period. That project, in particular, is the ‘Piedmont Lithium Project’, a lithium ore mining project being spearheaded by the company in the US state of North Carolina. A deal between Piedmont and Tesla represents the first-ever US-domestic lithium ore supply deal for an electric carmaker, a notable disruption to the status quo.

Lithium ore is a core component that’s used to produce the battery cells used to power current electric vehicles. Currently, Tesla relies on Japanese multinational Panasonic to produce battery cells for its vehicles since it entered into a partnership with the company in 2014, a reliance the company seems to be wanting to shift away from by beginning to produce its own battery cells, which itself requires a steady and voluminous supply of lithium ore to do so. Tesla’s deal with Piedmont is a testament to that, as the famed electric carmaker looks to produce its own battery cells to possibly cut down manufacturing costs and overall gain more control over its manufacturing and supply chain. 

It shouldn’t be surprising that Tesla is looking to produce battery cells in-house, given the company’s recently stated goal of churning out electric cars that’ll cost as low as $25,000. Achieving that goal requires Tesla to significantly lower its manufacturing costs, an endeavor where manufacturing its own battery cells for cheaper prices come in handy.

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