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Tesla set to overhaul EV battery supply chains, eventually

Chile 82 Cons. Discr. - Autos 935 Info Tech - Tech Hardware 604 Materials - Metals/Mining 623 U.S. 4545

Electric vehicle and energy device maker Tesla has announced a slew of new plans for its battery technology at its “Battery Day”. From a vehicle perspective the firm expects to increase sales to 20 million vehicles in 2030 compared to 367,500 last year as well as developing a vehicle at a cost of $25,000 over the next three years. 

The development of the electric vehicle industry has been held up by a slump in demand resulting from the COVID-19 pandemic. U.S. bilateral trade in electric vehicles ( exports plus imports) climbed 111% year over year in 2019, led by a 132% jump in exports as Tesla built out its Model 3 production.

There was a 63.0% drop in Q2 party due to lower demand and partly due to Tesla starting production of the Model 3 in China. There’s signs of a recovery in July with exports being unchanged compared to a year earlier in July.

COVID-19, Shanghai Gigafactory slow U.S. EV exports

Chart segments U.S. international trade in electric vehicles by direction.   Source: Panjiva

In terms of battery technology, Tesla’s economic aim is to cut costs by 56% on a dollar per kilowatt-hour basis via a mixture of battery chemistry, design and manufacturing. The plans also count on cutting the use of cobalt in the batteries and replacing it with nickel. 

There’s been a marked decline in U.S. imports of cobalt ore and materials in 2020 with shipments down by 15.4% year over year in the seven months to July 31, led by a 25.8% slide in shipments from the EU and a 20.7% dip in imports from Norway while shipments from Canada fell by a more modest 13.2%.

Cobalt imports slow inline with COVID-19 demand drop

Chart segments U.S. imports of cobalt ore and derived products.   Source: Panjiva

Lithium will remain a key material and so demand should scale with increased cell production. Tesla for example plans to scale up to 3TWh per year of production in 2030 vs 100GWh in 2022, or a 53% compound annual growth rate, though Tesla is looking to use higher capacity silicon to carry lithium rather than graphite.

The availability of lithium has been picking up. Chilean exports of lithium, one of the big three producing nations, climbed by 14.7% year over year in 2019, accelerating to a 55.5% jump in Q2’20 despite the ongoing pandemic. 

The expansion has been led by SQM which increased exports by 76.9% year over year in Q2. Yet, the availability is proving volatile with exports down by 51.2% year over year in July including a 70.0% dip in SQM’s exports. Notably Tesla plans to source lithium in the U.S. as well as recycling old vehicle batteries for its North American manufacturing which may crimp room for growth for Chilean exports into that market in the longer term.

Chilean lithium export growth judders to a halt in July 2020

Chart segments Chilean exports of lithium by shipper on a monthly and three-month average basis.   Source: Panjiva

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