Tesla has been one of the most successful start-ups of the last decade. In the past five and ten years, the stock has soared by 853% and 1,930% respectively.
However, investors are now questioning if the company’s growth has peaked. Tesla stock dropped by about 20% in October. And of the seven largest companies in the S&P 500 index, Tesla is the only one whose profits have dropped substantially compared to last year.
Tesla CEO Elon Musk is counting on Tesla’s new lithium refining business to keep the company’s momentum going. Musk referred to the lithium refining business as a “money-printing machine.”
This week, The Globe and Mail reported that Tesla’s lithium refinery in Robstown, Texas, is expected to commence production earlier than anticipated. Tesla will commission the facility (pictured above) in the first half of 2024. Mass production will begin by the second half of the year.
The lithium hydroxide produced by the refinery will be a crucial component in Tesla’s battery cells, which are manufactured at Gigafactory Nevada.
Tesla is taking control of its future by accelerating the opening of its refinery. According to a Bloomberg report, the global capacity to refine lithium into battery-grade hydroxide is limited.
As a result, the world is experiencing a refined lithium supply shortage. Between January 2021 and November 2022, lithium prices surged by over 1,000%.
Moreover, the majority of the lithium refining facilities that do exist are based in China. Geopolitical tensions between China and the West could strain lithium supply chains even further.
Although lithium prices have come down in 2023, they’re expected to skyrocket again in the near future. EV sales are projected to more than double by 2030.
Lithium production is unlikely to keep pace with soaring demand. Although an enormous lithium deposit was discovered in Nevada’s McDermitt Caldera earlier this year, proposed lithium mines in the area are facing intense opposition from environmental groups.
By producing excess lithium hydroxide, the Robstown refinery can indeed become Tesla’s money-printing machine. Tesla will be able to sell its surplus at eye-watering prices.
Image Source: Sawyer Merritt