Tesla Goes Open Source, Ganfeng Lithium Goes for Vertical Integration

Tesla Goes Open Source, Ganfeng Lithium Goes for Vertical IntegrationLast week, Tesla Motors (NASDAQ:TSLA) founder Elon Musk took what could prove to be a revolutionary step in the electric vehicle (EV) race by scrapping the patents on Tesla vehicles. Musk said the move was in “the spirit of the open source movement.” 

As Musk explained in a blog post on his company’s website, “Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.” He sees the decision helping other companies by accelerating the timeline for EVs and other non-hydrocarbon vehicles to be mass marketed.

Currently, large automakers are either not producing electric or hybrid vehicles, or they are producing vehicles with limited range, according to Musk. Once the problem of limited range can be overcome, EVs will become more accessible.

Gigafactories for all

With batteries sitting at the epicenter of the EV design, it is no surprise that when Musk announced his plans to build a lithium-ion battery gigafactory, a spark was lit under the lithium market.

Put simply, if Musk’s ambitious battery plans were in action today, 17 percent of current lithium battery demand would go to Tesla alone. And, as battery demand is the primary driver of the lithium market, there could be some supply chain issues down the line. For junior resource companies in the lithium space, that is nothing but good news.

Manufacturing companies, on the other hand, need to start considering securing their own vertically integrated supply chains if they want a chance at staying relevant in the future.

One such company is Ganfeng Lithium, which last last week announced that it is acquiring a lithium battery company to build a vertically integrated supply chain.

According to a news release, Jiangxi Feng Li, also known as Ganfeng Lithium, “intends to acquire 400 million yuan in Shenzhen City, the U.S. worship Electronics Limited (hereinafter referred to as the United States thanks to e) 100% equity.”

Ganfeng will play 120 million yuan in cash and the remaining in shares at an issue price of 31.48 yuan per share.

The company “United States” was established in 2002, and is focused on research, development, manufacturing and sales of lithium-ion batteries, as well as other combinations of rechargeable batteries.

Ganfeng is already well on its way to being a vertically integrated specialty products company. Gangfeng holds a 17.5-percent stake in International Lithium (TSXV:ILC), a junior  lithium company, and an 80-percent participating interest in ILC’s Mariana lithium-potash brine project in Argentina. The Chinese company also owns 51 percent of Blackstairs Lithium in Ireland, of which ILC owns the remaining 49 percent.

With other companies, like LG Chem, also looking into battery plants, and Tesla’s patents now free to be enjoyed, it will be interesting to see how the landscape of the lithium market — and lithium batteries — will change.

 

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned. 

 

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