Tesla (TSLA) Inc (TSLA) is considering building a lithium refinery on the Texas Gulf Coast as it looks to secure supplies of key components used in batteries amid a surge in demand for electric vehicles.
The potential battery-grade lithium hydroxide refining facility, touted by Tesla as the first of its kind in North America, would “process raw ore into a state that can be used for battery production,” the company said in an application submitted to the Texas Comptroller’s office.
Tesla said the decision to invest in Texas would also be based on the ability to obtain local property tax credits.
CEO Elon Musk has previously said that as lithium prices soar, Tesla may have to go directly into the mining and refining industries on a large scale.
Musk has also been outspoken about the need for more players in the lithium refining industry. “You can’t lose. It gets permission to print money,” he said on the company’s second-quarter earnings call.
Ensuring a steady supply of battery components is critical for Tesla as it faces stiff competition in the fast-growing electric vehicle market.
In its Aug. 22 application, Tesla said that if approved, construction could begin in the fourth quarter of 2022 and would reach commercial production by the end of 2024.
Under the plan, Tesla would transport final product by truck and rail from the refinery to the various Tesla battery manufacturing sites that support the large and electric vehicle battery supply chain
Tesla shares rose 1.4 percent in pre-market trading, and the company also said it will use fewer dangerous reagents and produce usable byproducts than traditional processes.
Lithium Scramble
Lithium prices have soared this year due to a surge in demand from the automotive industry. China remains the world’s largest lithium processor, despite a series of setbacks to competing projects proposed in the U.S. and the European Union.
If Tesla’s plan goes ahead, the automaker could become the first in the industry to invest directly in lithium refining as it scrambles to strike deals with miners and refiners.
Arpit Agarwal, a director at venture capital firm Blume Ventures, said, “Automakers are trying to make sure they can control lithium supply as a hedge against any future geopolitical situation that may arise from supply disruptions.” startups such as Euler Motors and Yulu.
Tesla would also benefit from lower logistics costs and possible incentives from the U.S. government, he added.
Battery makers are also looking to increase U.S. production, and the shift to electric vehicles could increase as the country imposes stricter regulations and tightens tax-credit eligibility.
Earlier this year, Tesla itself signed a five-year supply agreement with Australia’s Liontown Resources, while rival electric car makers Stellantis and BYD have invested in miners around the world.
Ningde Times, the world’s largest battery maker, has also taken a stake in the lithium miner.