Battery grade graphite and lithium demand could surge if pre-orders of Tesla Motors’ Model 3 are any indicator of sales between 2017 and 2021.
Orders for Model 3 – which there is very little information on at the present, including the battery size – today reached 325,000 units.
Analysts expected Tesla to secure between 30,000 to 60,000 orders on day one of Model 3 availability, however expectations were comfortably beaten when Elon Musk revealed 115,000 orders at the end of the official launch.
As a comparison, in the first 24 hours of the Model S launch, Tesla received 300 reservations while the Model X reached 8,000 pre-orders in its opening day.
It is important to note that pre-orders of this nature are not sales. However, the Model 3 numbers are significant as it addresses whether the wider public are prepared to buy pure electric vehicles and focuses the question on whether Tesla can deliver.
How much lithium and graphite?
There are many assumptions that are made when estimating Tesla’s raw material demand as it ramps up to becoming a mainstream vehicle manufacturer.
These include: the size of Model 3’s battery, whether Tesla will use an NCA cathode, ramp up rate of the Gigafactory, bottlenecks in car manufacturing, and drop off in pre-orders versus the new ones that come in.
Benchmark Mineral Intelligence estimates for Model 3 raw material consumption between now and 2021 are as follows:
In 2021, based on Tesla manufacturing 150,000 Model 3 units, Benchmark estimates that the company will consume 10,800 tonnes of spherical graphite for its anodes and 7,200 tonnes of lithium hydroxide as a cathode raw material.
In terms of battery raw materials: this is the equivalent of 44% of the world’s battery grade lithium hydroxide and 15% of the world’s spherical graphite consumption in 2015.
Cumulatively, assuming today’s 325,000 Model 3 pre-orders convert into sales, over the next 5 years – a conservative number considering there is still 18 months before it is launched – the product line will consume a total of 23,400 tonnes of spherical graphite and 15,600 tonnes of lithium hydroxide.
In 2015, 100% of the world’s battery-grade spherical graphite was sourced in China (Benchmark Mineral Intelligence) What will Tesla’s average annual demand for vehicles be?
Of course, this demand will not hit the market all at once.
Tesla expects to produce 80-90,000 Model S and Model X vehicles in 2016, a significant increase on the 50,580 units it made in 2015.
If Tesla is able to reach a production total 300,000 vehicles a year all with batteries ranging from 60kWh to 90kWh in capacity, its annual demand for spherical graphite in vehicles in 2021 will be over 26,000 tonnes a year.
In the same period, the company’s lithium hydroxide consumption will be over 17,000 tonnes a year.
This does not take into account Tesla Energy’s raw material consumption for its Powerwall and Powerpack utility batteries, which could be up an additional 40%.
Then there is a question of stockpiling: how much will Tesla wish to stockpile?
Lithium hydroxide would pose a problem if stored longer than 6 months; however spherical graphite can be stockpiled for some time.
It would be fair to assume Tesla will require at least one year’s worth of stockpiled material where possible which could further increase its purchases by 25% a year from 2018-2021.
Will Tesla have to compete with China’s megafactories?
One thing is for certain, Tesla will become one of the largest purchasers of niche raw materials in the world. But with 70% of expected lithium ion battery demand coming from China, securing the necessary volumes will not be an easy feat.
As of April 2015, Benchmark estimates that at least 12 lithium ion battery megafactories are in the pipeline between now and 2020. These are classified as new or existing plants being planned, constructed or expanded to gigawatt hour capacity.
Of these 12 operations, only two are located in the US (Nevada and Michigan), while 7 are located in China. Europe, Taiwan and Korea are the three other locations expecting significant new battery capacity.
Not all of these plants will be built to full capacity, but even if only 25% of this new capacity enters the market in the expected timeframe, there will be serious competition for the same raw material supplies.
