Tesla Considering Building a US Lithium Refinery Later This Year

Pioneer electric vehicle (EV) maker Tesla (NASDAQ:TSLA) is looking to set up a lithium-refining facility in the US later this year, with production to be shipped to the company's battery manufacturing sites.

Tesla is seeking relief on local property taxes for the refinery, which it says will be “the first of its kind in North America,” as per an application with the Texas Comptroller's Office.

The carmaker is considering potential sites in Texas and Louisiana. Subject to approval, construction could start as early as the end of 2022, with first output expected by the end of 2024.

According to Tesla, the process it will use at the facility is “innovative and designed to consume less hazardous reagents and create usable by-products compared to the conventional process.”

The Elon Musk-led company also said it is evaluating building out facilities to support other types of battery materials processing, refining and manufacturing.

“The move signals a further trend towards vertical integration for EV makers — vitally important given the high cost of battery raw materials and increasingly limited options to secure material,” Project Blue analysts said.

CEO Musk has been calling for more lithium development since earlier this year. Following a rally for the commodity seen in 2021, he pointed out that prices were at "insane" levels.

“I’d like to once again urge entrepreneurs to enter the lithium-refining business. The mining is relatively easy, the refining is much harder,” Musk said on a July earnings call, adding that there are software-like margins to be made in lithium processing. “You can’t lose, it’s a license to print money.”

Most lithium mining happens in Australia from hard-rock sources and in Chile from brines, and those countries are the two top producers. But lithium refining is dominated by China, which currently accounts for more than 75 percent of global lithium processing capacity — with the US falling far behind.

It is not the first time Tesla has considered jumping further upstream. In 2020, at Tesla’s battery day, the Austin-based company announced plans to build a cathode plant in Texas and a lithium hydroxide chemical facility, where it will turn hard-rock spodumene concentrate into lithium hydroxide for direct use in its battery cells.

Tesla’s current lithium suppliers include top producer Ganfeng (OTC Pink:GNENF,SZSE:002460), and earlier this year the company also signed deals with juniors Liontown Resources (ASX:LTR) and Core Lithium (ASX:CXO,OTC Pink:CXOXF) for future supply.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.