According to a report in Automotive News, battery module production is a factor slowing production of Tesla’s Model 3; and while it is unclear whether a shortage of lithium is part of the problem, the company is reported to have been in talks with Chilean lithium supplier SQM to secure a steady supply of the metal.

Tesla (www.tesla.com) co-founder and CEO Elon Musk said: “Battery module production has been a limiting factor on Model 3 output. We were a little over-confident and complacent in thinking this is something we know and understand.” Tesla’s battery struggles are regarded as showing that the transition to electric vehicles will not be without significant hurdles. Much of the demand for lithium is taken up by the consumer electronics industry; and as automotive manufacturers ramp up plans for EVs, lithium demand is expected to hit new highs, so competition for lithium will soar.

By 2030, demand is expected to hit 250,000 tonnes a year, up from less than 50,000 tonnes in 2017. Some industry experts have estimated that companies will need to spend between $350 billion and $750 billion to find and develop new lithium mines to support this rising demand. Supplies of the metal can be difficult to predict, because of the variety of ways it can be produced. Lithium is primarily mined in Australia (using a process called ‘hard rock’ mining, which produces the metal in weeks) or in South America (through brine mining, which is cheaper but can take up to two years).

Tesla, General Motors, Nissan and Chinese automotive companies are the primary companies producing fully electric vehicles, but a number of other companies — including Volvo, Ford and Mercedes-Benz — have said in the last year that they will be increasing their EV offerings in the next five years.

Last year, China’s Great Wall Motors took a 3.5% stake in the Australian lithium producer Pilbara Minerals; in January, Toyota invested in the Argentinian lithium mining company Orocobre. KC Chang, a senior economist at IHS Markit, said there is currently no replacement for lithium in rechargeable batteries, but if faced with shortages or other risks to supply, automotive companies could be “incentivised” to explore the development of other com-
ponents.

“Supplier pricing will also be a major driver of whether lithium alternatives or processes such as battery recycling will get more attention. If producers charge too high a price, OEMs will look for alternative battery chemistries. The results of these negotiations are going to be a signpost of how quickly or slowly EV adoption will evolve on a global basis.”