Tesla may get into the lithium business in Chile as the price of battery ingredients soar

Brine pools and processing areas of the SQM lithium mine on the Atacama salt flat in northern Chile.
Brine pools and processing areas of the SQM lithium mine on the Atacama salt flat in northern Chile.
Image: Reuters/Ivan Alvarado
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While showing off Tesla’s Gigafactory in the Nevada desert last year, its designers showed journalists a curious thing: One side of the factory’s massive wall could be opened up to received lithium ore one day. Tesla said that the facility had been built with an eye toward receiving raw lithium material on one side and producing a finished battery pack on the other. The only operating lithium mine in the US is about 200 miles away in Clayton Valley, Nevada.

But Tesla is hedging its lithium bets. The Finanical Times reports (paywall) Tesla is in talks with Chile’s largest lithium producer Sociedad Química y Minera de Chile (SQM) to invest in a processing plant. Reuters quotes Chilean officials saying the two companies are “exploring” agreements for “important volumes” of lithium hydroxide, a key battery ingredient. Chile, Australia, and China are the largest producers, although Chile is the cheapest source (and Chilean officials recently agreed to up production quotas for an SQM site).

The silvery-white metal, called “white gold,” is used as an electrolyte material and is considered key to any company’s ambitions in supplying future energy source for transportation. Lithium prices have spiked 200% over the last five years (paywall). As the race for electric vehicles heats up (GM’s Chevy Bolt is an unexpected success), automakers are scrambling to secure their own supplies. Earlier this year, Toyota said it had secured a 15% stake in an Argentinan lithium producer.

Tesla must satisfy massive demand as it struggles to ramp up production of its Model 3, its first mass-market electric vehicle. Despite delays, the company wants to produce at least 500,000 vehicles (of all models) annually by the end of 2018.