Tesla and other electric vehicle manufacturers rely heavily on a few different minerals. One of them, lithium, is largely mined, refined and processed by China, though lithium deposits can be found worldwide. Still, China’s jump on the raw materials game for EV minerals will make it hard for other countries to compete at such a scale, and it could mean a few things for Tesla and other EV makers.
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China is aggressively trying to maintain its dominance in lithium and other mineral processing for EV batteries, as depicted in a worldwide analysis of the industry shared by Gavekal Research earlier this month. The news, as reported by Barron’s, comes amidst surging EV demand as consumers begin to turn toward zero-emission technology — resulting in lithium price increases of as much as 400 percent over the last year.
The International Energy Agency estimates the value of lithium sales to increase 20-fold in the decade leading up to 2030, and China is already leading the world’s lithium market. Additionally, Tesla gets most of its lithium from the country, with some of it coming from companies with Argentinian mining operations. Still, estimates hold that China refines more than half of the world’s lithium.
“It refines 60% of the world’s lithium, controls 77% of global battery cell capacity and 60% of the world’s battery component manufacturing,” wrote Gavekal of China. “Of 200 battery mega-factories in the pipeline to 2030, 148 are in China.”
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Still, Gavekal also says that the trade war lodged by the Trump administration against China and Brazil has affected how each country views U.S. automakers — including Tesla.
“The US brand has lost much of its shine in Latin America in recent years,” wrote Gavekal. “While Beijing courted Argentina and other countries across the region, the U.S. under the Trump administration launched a trade war against it and Brazil.”
For now, China's lithium advantage will mean continued price increases, and Tesla's continued reliance on the country for lithium, alongside several other EV makers.
Still, Tesla has ongoing supply deals with China-based lithium refiners Ganfeng and Yahua. Additionally, CEO Elon Musk has noted the rising costs of lithium mining and refining may require Tesla to “get into the mining & refining directly at scale, unless costs improve.”
But with China’s hyperfocus on raw materials in its own supply chains, Tesla’s relationship with Chinese refiners won’t be going anywhere, even if it begins refining the mineral themselves. Even as North American lithium miners, such as U.S. companies Albemarle and Livent, continue to grow and have even been supported by policies from the Biden administration, the U.S. is still years out from having a chance to catch China’s lithium market.
“China is the factory of the world,” says 5E Advanced Materials CEO Henri Tausch. “China just tried to integrate [materials] in their manufacturing process.”
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