Photo: Tesla | Edited
Scaling up EV production requires huge amounts of raw materials to produce the necessary Li-Ion battery cells. Tesla is working on this front with a contract awarded to South Korean company L&F Co to supply $2.9 billion of cathode materials over two years.
Tesla is ramping production at its newest gigafactories and, at the same time adding new vehicle models to its lineup. The success of its operations largely depends on the ability to produce the necessary battery cells in significant quantities. This means securing raw materials and components in an EV market where the competition is heating up.
Traditionally, China was the main supplier for these resources, but the U.S. government signaled it wants American companies to diversify the supply chain. The Inflation Reduction Act aims to incentivize exactly that while trying to convince companies to relocate production to North America. This is why many carmakers have recently announced battery factories in the region while signing contracts with North American or Korean suppliers for raw materials and battery components.
Tesla is following the same path, signaling its intention to enter the mining business by associating with another company or through a buyout. It also set up its first Lithium refining facility in Texas, showing that it wants to do whatever it takes to secure the precious materials it needs to scale up production. Tesla has estimated a production of at least 1.8 million electric vehicles in 2023, so there are a lot of battery cells that need to be produced to get there.
The decision has been made, though, and Tesla now moves the puzzle pieces in place to get there. The carmaker has contracted the local company L&F Co to supply high-nickel cathode materials. The contract, which runs from January 1, 2024, until December 31, 2025, is worth $2.9 billion, as shown in a public filing disclosed by L&F Co on February 28.
According to analysts' estimates, the value of the contract covers around 77,000 tons of high-nickel cathode materials at market prices. The actual quantity may vary depending on lithium prices and exchange rates. Considering current cathode prices of $30-$60 per kWh, the cathode material should cover a Li-Ion battery cell production of around 60 GWh. This is enough for 800,000 electric vehicles with a battery capacity of 75 kWh or more EVs if the batteries are smaller.
Since South Korea has a free-trade agreement with the U.S., the batteries made with L&F materials should still qualify for incentives under the IRA. Considering the high-nickel content, we believe the materials covered by the contract are for the 4680 cell production. The quantity of the cathode materials also suggests that Tesla is confident about ramping up its battery production in the next years. It's another indication that Tesla is finally cracking the dry battery electrode manufacturing process.
Traditionally, China was the main supplier for these resources, but the U.S. government signaled it wants American companies to diversify the supply chain. The Inflation Reduction Act aims to incentivize exactly that while trying to convince companies to relocate production to North America. This is why many carmakers have recently announced battery factories in the region while signing contracts with North American or Korean suppliers for raw materials and battery components.
Tesla is following the same path, signaling its intention to enter the mining business by associating with another company or through a buyout. It also set up its first Lithium refining facility in Texas, showing that it wants to do whatever it takes to secure the precious materials it needs to scale up production. Tesla has estimated a production of at least 1.8 million electric vehicles in 2023, so there are a lot of battery cells that need to be produced to get there.
The decision has been made, though, and Tesla now moves the puzzle pieces in place to get there. The carmaker has contracted the local company L&F Co to supply high-nickel cathode materials. The contract, which runs from January 1, 2024, until December 31, 2025, is worth $2.9 billion, as shown in a public filing disclosed by L&F Co on February 28.
According to analysts' estimates, the value of the contract covers around 77,000 tons of high-nickel cathode materials at market prices. The actual quantity may vary depending on lithium prices and exchange rates. Considering current cathode prices of $30-$60 per kWh, the cathode material should cover a Li-Ion battery cell production of around 60 GWh. This is enough for 800,000 electric vehicles with a battery capacity of 75 kWh or more EVs if the batteries are smaller.
Since South Korea has a free-trade agreement with the U.S., the batteries made with L&F materials should still qualify for incentives under the IRA. Considering the high-nickel content, we believe the materials covered by the contract are for the 4680 cell production. The quantity of the cathode materials also suggests that Tesla is confident about ramping up its battery production in the next years. It's another indication that Tesla is finally cracking the dry battery electrode manufacturing process.
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