At a recent event hosted by the Minerals Council of Australia, Robyn Denholm, chairperson of Tesla, said her company plans to spend more than USD 1 billion a year to procure raw materials from Australia. Tesla especially wants to tap into the country’s rich reserves of lithium and nickel. Presently, Tesla sources three-fourths of its lithium and over a one-third of its nickel from the country.
According to the coverage of the event by news agencies and other media platforms, Denholm said that Australia will stand to gain enormously due to the development of the supply chain for electric vehicles as well as the focus on the advent of green energy era in environmental, social, and corporate governance (ESG). Denholm noted that each Tesla vehicle contains about USD 5,000 worth of feedstock raw materials, nearly all of which can be supplied by mining projects in Australia.
Australia is highly attractive to Tesla because it is the only country that has natural deposits of lithium, nickel, and cobalt all within its land. These three metals are essential in the manufacturing of ternary lithium batteries that power electric vehicles. According to the Australian government, the country’s exports of spodumene (or lithium ores) and nickel are estimated to reach AUD 1 billion (USD 773 million) and AUD 4 billion (USD 3 billion) respectively this year.
Denholm’s comments reflect the current plan of the US government to rely on allies to supply most of the key materials for ternary lithium batteries. While the US has cobalt and lithium reserves, there are oppositions to the development of domestic mining projects for these metals on environmental grounds. Sources in the US government told Reuters in May that the US will be importing battery-related raw materials while fostering domestic manufacturing of battery cells and packs. This strategy will balance the interests of industries and environmental groups.
Australia, Canada, and Brazil are expected to be the main beneficiaries of this strategy. Tesla is rumored to be in talks with Canadian mineral exploration company Giga Metals about developing a nickel project in Canada. The Brazilian government has also confirmed that it has been in discussions with Tesla about access to Brazil’s lithium deposits.
However, at the Mineral Council’s event, Denholm also suggested that Australia should expand its capacity for processing lithium ores. She pointed out that in 2020, the country accounted for 49% of global supply for spodumene, but it exported no processed lithium materials that can be directly used in battery manufacturing. She added that the sales of spodumene from Australia in 2020 came to around USD 100 million. If that amount of spodumene was processed within the country and then exported as refined products, the value would have reached around USD 1.7 billion.
Tesla, like other manufacturers for batteries and electric vehicles, continues to aggressively acquire sources of lithium and other battery metals around the world. In 2018, Tesla arranged a three-year deal with Australian mining and mineral exploration company Kidman Resources for lithium supply. Kidman Resources has a mining operation that it co-owns with Sociedad Química y Minera de Chile (SQM). Called the Mount Holland project, it is located in Western Australia’s Earl Grey Deposit, one of the world’s largest concentrations of lithium ores. Also, Tesla has been attempting to set up a domestic lithium mining operation and already secured the rights to 10,000 acres of land in Nevada. The proposed site of the mining operation is actually near its Gigafactory. However, the development of lithium mining in Nevada is facing opposition from environmental groups.
Besides lithium, Tesla is also very hungry for nickel. An article published in Electrek this February said that Tesla’s CEO Elon Musk has been requesting nickel mining operations to ramp up production. At a presentation on his company’s earnings last year, Musk said that his company will provide nickel producers with “a giant contract for a long period of time” if they can extract the metal efficiently, in large quantities, and in a relatively eco-friendly manner.
Adding to Denholm’s comment on mineral access in Australia, Musk said that while Tesla gets most of its lithium from the country, it is also seeking greater quantity of nickel. For vehicles manufactured in China, Tesla uses lithium-iron-phosphate (LFP) batteries so as to save cost. However, nickel-based cathode offers a higher energy density. As for batteries with a cobalt-based cathode, they are mainly used in consumer electronics such as smartphones. Tesla wants to reduce the consumption of cobalt in battery manufacturing due to the high cost of the metal.
Apart from rich mineral resources, Tesla is also eyeing the huge Australian market for PV generation and energy storage. In an article published this May, Australian Associated Press reported that Australia continues to be the global leader in the installation of rooftop PV systems, with one in every four homes having solar panels on its roof. PV capacity per capita has also reached 591W, the highest in the world. Furthermore, to prevent an oversupply of electricity from rooftop and ground-mounted PV systems, the regional transmission systems of the country are also in need of energy storage systems. Hence, Tesla is in a position to become a major provider of both PV systems and battery energy storage systems for homes and utility projects. In fact, the company has demonstrated the immense value of battery energy storage systems with the Hornsdale Power Reserve in South Australia.
In 2018, Tesla partnered with the government of South Australia to launch a home battery scheme that subsidizes the installation of battery energy storage units. According to reporting by local renewable energy news websites, the scheme has evolved with Tesla now providing free installation of its Power Wall units to low-income homes and in public housing units that do not have rooftop solar panels. As of now, 1,100 homes in the state have been fitted with Tesla’s PV systems and energy storage systems at no charge. The hope is that the energy storage systems will expand to more than 41,000 homes, thereby realizing a virtual power plant.
By locking the supply of raw materials from Australia, Tesla has shown its ambition to dominate the supply chain for traction batteries. The company is also expanding into all other aspects of the battery industry and laying out a comprehensive strategy (e.g., raising battery production capacity, strengthening R&D, developing a battery recycling process, and exploring new technologies). It is also working with other battery suppliers such as CATL, LG Energy Solution, and Panasonic to rapidly scale up the production of its batteries.