Tesla’s First Lithium Agreement

Last week, Tesla announced they have made a deal with two companies for a mine in northern Mexico to mine Lithium products (Lithium Hydroxide, 29% Li by weight, and Lithium Carbonate, 18% Li by weight). The companies involved still need to get funding to build the mine and commence operations, but it should be a bit easier for investors know they have a deal lined up with Tesla Motors to buy all that lithium that will be mined.

The deal starts with 35,000 tonnes of Lithium initially, and may scale to 50,000 tonnes of Lithium as the production at the plant scales up. So how many kWh does that translate to?

Lithium Ion batteries vary in their amount of their elemental lithium (vs. lithium hydroxide or lithium carbonate) based on the type of chemistry and other materials present. The NCA cells found in the Model S use about 300 g of elemental lithium per kWh. This translates roughly into either 1.67 kg of Lithium Carbonate (LI2CO3) or 1 kg of Lithium Hydroxide (LiOH).

Let’s assume that its a 50/50 mix of both Lithium products, which yields a requirement of 1.33 kg of Lithium products per kWh of battery produced. At 35,000 tonnes of Lithium, that is 26.3 GWh of manufactured cells, assuming that there is no waste product from the lithium coming into the factory (this is not likely the case, so the 26.3 GWh will be the upper bound for our 50/50 assumption). The maximum initial production would be 35 GWh if 100% of the supplied lithium product was Lithium Hydroxide, and the minimum initial production would be 21 GWh if 100% was Lithium Carbonate.

At the contract maximum of 50,000 tonnes of Lithium product, you’re looking at a minimum of 29.9 GWh, a midpoint of 37.6 GWh, and a maximum of 50 GWh of battery cells for the Gigafactory.

So given the inputs and assumptions, we can estimate 26.3 GWh of battery cells to start with, and 37.6 GWh of cells at the top end of the range. If 75% of the cells manufactured go into cars, and the other 25% of the cells go into Tesla Energy products like the Powerpack and Powerwall, it would mean a production of between to 350,000 and 500,000 55 kWh battery packs for the Tesla Model 3 (55 kWh is my estimate for the average pack size sold).

Tesla’s initial stated capacity for the Gigafactory is 35 GWh of cells (and 50 GWh for battery packs – meaning 15 GWh of finished cells are delivered to the plant). However recently Elon has stated that the manufacturing capacity may be even higher than that, as they seek to more efficiently use floor space in the manufacturing process. Tesla may be able to build the same sized building, but rather than get 35 GWh of cell manufacturing capacity, they could get 50 GWh or more. Its currently unknown how much additional capacity they might be able to get, we won’t get our first look until the first phase opens in the first half of 2016 for Tesla Energy cell manufacturing.

(part of this post cribbed from my own Ars Technica comment on this same story)

As a postscript, I’m disappointed the company I had money invested in, Western Lithium, was not Tesla’s first choice for Lithium for the Gigafactory, despite that the mine for the Lithium was in the same state as the Gigafactory and less than 200 miles away. It might be that Tesla needs more than one lithium supplier, and there is still a chance for Western Lithium. And Tesla is not the only game in town either – other battery factories like LG Chem also need Lithium.

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