Tesla's Lithium Supply Chain Breakdown: From Musk's "Salt" to a 2.5 Billion Ton Demand Gap

Elon Musk has been paying close attention to lithium batteries over the years. In 2021, lithium prices surged dramatically, and he was quite straightforward: "Lithium is like salt in a salad"—although lithium accounts for only 1/10 of a battery, its volume determines everything. How many batteries does Tesla use annually? Data shows that by 2030, global lithium battery demand is expected to quadruple to 3.9 TW.

On the supply side, Tesla has already taken action: it has signed contracts with Chinese Ganfeng Lithium (GNENF), Australian Liontown Resources (LTR), and American Piedmont Lithium (PLL). But that's not enough—Tesla still relies on battery manufacturers like Panasonic, LG, and CATL to help establish the supply chain.

More importantly, China controls 72% of the world's lithium refining capacity. Tesla has experienced setbacks and plans to build its own lithium refinery in Nevada starting in 2024, with an annual capacity of 50 GWh, which is expected to be fully operational this year. Another refinery in Texas is nearing completion, but water scarcity has been an issue—South Texas has experienced a severe drought. Fortunately, Tesla recently secured a contract to supply 8 million gallons of water daily.

Interestingly, Tesla does not plan to mine lithium itself. CEO Musk has explicitly stated that the company will focus solely on refining. Why? Mining is too difficult, with high technical barriers, and requires significant investment to develop the learning curve. Industry insiders predict that automakers in the future may need to acquire up to 25% of the world's mines to ensure supply—mere signing of supply agreements is far from enough.