ReflexFunds
Active Member
Copying some of my post from the main thread.
In the short term processed Nickel and Lithium Carbonate supply look fine, but Tesla's new 2TWh cell manufacturing plan is going to completely change the equation.
@Fact Checking @neroden @KarenRei
In the short term processed Nickel and Lithium Carbonate supply look fine, but Tesla's new 2TWh cell manufacturing plan is going to completely change the equation.
Tesla's new in-house cells are almost certainly going to significantly bring down the cell capex required per kwh of capacity - however this is going to leave Nickel and Lithium capacity capex higher than the cell capex itself. Nickel and Lithium resources are not scarce, but upfront capex is high and mines & production plants have 5-6 years lead time. This is likely to make Nickel and Lithium the bottleneck both in terms of capital cost of battery expansion, and in terms of lead time of new capacity.
Panasonic spent $1.4bn on equipment at GF1 to date to install 35GWh of cathode & cell capacity - so c.$40 capex per KWh of capacity. At this price 1TWh would cost $40bn capex for the cathode and cell machinery alone. Tesla will bring this down massively with its next generation machines/designs - however bringing the cell capex down makes other capex more significant.
On top of cell capex you need to pay for module and pack equipment, and factory construction. Currently suppliers will also have to pay to build new lithium/Nickel (& possibly cobalt) mines & processing plants, anode factories and other cell component factories.
Currently Nickel capacity would cost around $20-30 per KWh of annual capacity and Lithium Carbonate/Hydroxide around $15 per KWh of annual capacity. These seem high relative to the cell capex - this is partly because these metals plants have a life of 20-30 years - so upfront capex is very high, but depreciation is lower as its spread over more years. In any case, 1TWh of cells would require around $40bn of Nickel & Lithium upfront capex and currently 5-6 years lead time for production ramp.
If Tesla is planning to build 2TWh of cell capacity, at current prices and cell composition, Tesla will need to convince suppliers to invest $80bn in lithium & Nickel production plants, and for these suppliers to have 100% exposure to a high risk new project, in a high risk new market (EVs) with a single customer. It will be very hard to get suppliers to commit to this, and suppliers will have to demand a significant risk premium due to the financing costs of building high risk new capacity - so with production at this scale Tesla is highly incentivised to take Lithium and Nickel mines and production plants in-house. Tesla is exposed to all of these risks anyway, so it makes sense to bring the risk in-house and take away the risk premium which would be required by a third party. If Tesla bring Lithium and Nickel in-house, they can also focus on R&D to bring down the capex and opex cost of battery metal production in the future, as well as accelerate the ramp time of new capacity.
I'd be interested to know what your thoughts are on the necessity of taking lithium and Nickel in-house for Masterplan Part 3?Panasonic spent $1.4bn on equipment at GF1 to date to install 35GWh of cathode & cell capacity - so c.$40 capex per KWh of capacity. At this price 1TWh would cost $40bn capex for the cathode and cell machinery alone. Tesla will bring this down massively with its next generation machines/designs - however bringing the cell capex down makes other capex more significant.
On top of cell capex you need to pay for module and pack equipment, and factory construction. Currently suppliers will also have to pay to build new lithium/Nickel (& possibly cobalt) mines & processing plants, anode factories and other cell component factories.
Currently Nickel capacity would cost around $20-30 per KWh of annual capacity and Lithium Carbonate/Hydroxide around $15 per KWh of annual capacity. These seem high relative to the cell capex - this is partly because these metals plants have a life of 20-30 years - so upfront capex is very high, but depreciation is lower as its spread over more years. In any case, 1TWh of cells would require around $40bn of Nickel & Lithium upfront capex and currently 5-6 years lead time for production ramp.
If Tesla is planning to build 2TWh of cell capacity, at current prices and cell composition, Tesla will need to convince suppliers to invest $80bn in lithium & Nickel production plants, and for these suppliers to have 100% exposure to a high risk new project, in a high risk new market (EVs) with a single customer. It will be very hard to get suppliers to commit to this, and suppliers will have to demand a significant risk premium due to the financing costs of building high risk new capacity - so with production at this scale Tesla is highly incentivised to take Lithium and Nickel mines and production plants in-house. Tesla is exposed to all of these risks anyway, so it makes sense to bring the risk in-house and take away the risk premium which would be required by a third party. If Tesla bring Lithium and Nickel in-house, they can also focus on R&D to bring down the capex and opex cost of battery metal production in the future, as well as accelerate the ramp time of new capacity.
@Fact Checking @neroden @KarenRei
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