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Battery Cost Reduction versus Lithium Price Increase

Discussion in 'Tesla Motors' started by Henry N, May 5, 2016.

  1. Henry N

    Henry N Member

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    Anyone has any insight into the plan for battery cost reduction beside the "economy of scale" operations of the Giga factory ?
    Demand for Lithium from EV cars has driven up price of raw material (Lithium carbonate) which in turn will negate savings from the Battery production side. I hope the battery project management team included a hefty percentage increase in raw material in their cost model and keep the TM3 at $35K without incurring a loss.
     
  2. Uncle Paul

    Uncle Paul Member

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    Typically when the price of a commodity goes up, additional supplies come into the marketplace to lower the price back down, or even lower.

    Around the world exploration is going on to prospect for additional supplies of the profitable material.
     
  3. Henry N

    Henry N Member

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    According to news articles today, Lithium carbonate price has increased steadily (28% in 2015, 47% first quarter 2016). In principle, high price will draw in new suppliers and that will balance out the supply-demand curves. Unlike the case with oil, lithium reserves are rather limited and so far only a few regions in the world are mining it. It could take a number of years for the price to stabilize after the spike in demand due to new EV releases from various auto makers.

    Although Tesla has closed deals with various suppliers in South Americas and Nevada, the prices they get may be affected by market price. Setting the fixed $35K price on the TM3 2 years before its release poses a lot of risk. Typical auto makers don't release pricing until they have the cars nearly ready.
     
  4. glenhurst

    glenhurst Member

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    Actually, I don't think lithium reserves are considered to be limited. There is more than enough on the planet for all vehicles in the world to be electric, although the difficulty of getting it varies obviously (same as with oil). Lithium only accounts for about 3% of the cost of the battery, according to Musk, Straubel, et al.
     
  5. EcoHeliGuy

    EcoHeliGuy Member

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    1) lithium is one of the most common elements on earth.

    2) it's extremely easy to mine as if found in salt flats

    3) a very small percentage of the battery is comprised of lithium so the battery pack cost isn't effected enough by Lithium commodity price fluctuations to have sizable significants
     
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  6. wdolson

    wdolson Active Member

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    I think the price spikes in the lithium supply has been due to speculators buying up options hoping to make a score down the road as they expect demand to go way up. They will probably lose their shirts though because they don't understand the dynamics of the market they are manipulating. As people have pointed out, the amount of lithium in a Li-ion battery is very small, and the world has abundant supplies of lithium, it's just there aren't that many mines operating right now. New supplies need to be brought online, but that's happening right now and in a year or so I expect lithium mines will be going bankrupt because the market will be glutted and those people who were trying to corner the market will have to dump their options at the going price or take delivery and there aren't too many Wall Street bankers who want a few tons of lithium ore dumped in the driveway of their $50 million mansion.

    Commodity markets exist to stabilize prices for companies that use that commodity. By buying futures when the price is low, they can lock in a good price when they need it, regardless of what the spot price is that day. Speculators get into these markets to try and make money on the price fluctuations, but they are buying contracts for delivery of the commodity and if they don't sell to someone who actually needs the stuff before the contract date, they need to take delivery of the stuff, or default.

    Wkipedia has a page on lithium as an investment:
    Lithium as an investment - Wikipedia, the free encyclopedia

    It isn't traded as widely as commodities like gold, silver, corn, oil, etc, as it has been a niche market until recently. It may get promoted to a more major commodity if the price proves to be very volatile and battery makers need a stable market, but I expect this is a short term blip that will be gone soon.

    Not only is lithium common, but it's also easily recycled so when lithium batteries need to be pulled from cars, there will be a robust secondary market which will initially re-purpose the batteries for stationary storage and then when they get too degraded for that, the materials will be recycled into new batteries. Over time we will lose very little of the lithium being mined today and when we reach market saturation for EVs (probably about 40 years), mining will be only to cover growth and losses due to accidental destruction or batteries that get thrown away instead of recycled. But like the lead acid batteries in ICEs, the vast majority will be recycled as they wear out.

    Most of the cost of the lithium in a Li-ion battery is the refining and preparation to put it into the battery. They way those batteries are currently made is not a fast or easy process. There are some people researching how to do it faster and cheaper and I'm sure Tesla will jump on any ideas that prove themselves out, but for now it's not a simple process.

    I believe JB Straubel has said the cobalt in the batteries they use is the highest price material in total cost in Tesla/Panasonic batteries.
     
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  7. doctoxics

    doctoxics Member

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  8. lklundin

    lklundin Member

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    Yes.

    Regarding the easy of mining, one can add that the environmental impact of the mining is relatively small, given that one typically pumps up the brine and let the sun dry out the lithium carbonate. F.ex. the Atacama desert has some vast salt flats with high lithium content and where there is nothing but the beating sun.

    On this topic I would also like to add that some not-so-knowledgeable writers (elsewhere) like to refer to lithium as the new oil. Which is nonsense since oil can only be burnt once, whereas lithium in batteries can be recycled.

    As for the price I picture how a couple of years back Elon Musk made visits to all current lithium miners and offered them then-favorable fixed prices for enormous guaranteed deliveries. And how each of them were thinking: "This newly rich software punk knows nothing about lithium, he's buying the world's current production many times over and paying a decent price. But hey, don't argue with the man, just sign on the dotted line".
     
  9. JPP

    JPP Active Member

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    As Elon once said:

    It is the salt in the salad.

    Small amount of a commodity and small fraction of the cost of the battery.
     

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