In a tweet posted late Friday, Twitter’s largest shareholder, Tesla founder and CEO Elon Musk, implied that “insane” costs of critical minerals integral to the manufacturing of his product line of cars have him thinking about getting into the mining and processing business himself.
“Price of lithium has gone to insane levels,” Musk, currently ranks first on Forbes’ list of the World’s Billionaires, tweeted. “Tesla might actually have to get into the mining & refining directly at scale, unless costs improve. There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.”
Musk was responding to the tweet below published by the World of Statistics, documenting the exponential rise in Lithium prices in recent years:
The price for this critical mineral has risen by 1,200 percent over the last two years, a reality that in part led to Tesla’s announcement earlier in the week that it would be raising the price for its Model 3 EV by €7,000, to a U.S. equivalent $54,838. The increase in price will result in the company’s German customers being unable to access a significant portion of the price-sensitive €9,000 subsidy offered by the German national government, rendering the Model 3 even less price-competitive in the marketplace.
The Model 3 price increase comes on the heels of price increases on some of the company’s other models, and by competing automakers. Rapidly rising prices for lithium and other critical minerals like copper, cobalt and others have been among the chief drivers for those hikes in EV prices.
It is key to remember that the world is in the very early stages of this latest round of pushing EVs (previous failed attempts to do so go all the way back to the late 19th century). It was less than a year ago that the International Energy Agency issued a report warning that, to meet the ambitious, potentially unrealistic goals being set for EV development by governments in the U.S. and Europe, demand for lithium would rise by 4,000 percent by 2040, with demand for other minerals rising apace.
Global EV sales have increase significantly in recent years, reaching more than 6.8 million during 2021. At the same time, demand for lithium-ion batteries used by the EV industry have also risen related to an array of other applications. With all of that taking place during a time of massive supply chain disruptions caused by the COVID-19 pandemic and other factors, the rising cost of these critical minerals is far from surprising.
In a later tweet on the same thread, Musk added that “We have some cool ideas for sustainable lithium extraction & refinement.” It deserves mentioning here that the visionary CEO has been entertaining the potential need for his company to mount its own mining effort since at least 2020, when Fortune Magazine reported that Tesla had managed to secure its own mining rights in Nevada after a potential deal to acquire a mining company fell through.
According to that report, Tesla “held discussions in recent months with Cypress Development Corp., which is seeking to extract lithium from clay deposits in southwest Nevada, but the parties didn’t reach a deal, the people said, asking not to be named because the information isn’t public. The electric car maker, which has vowed to slash its battery costs by 50%, instead focused on the plan that Chief Executive Officer Elon Musk outlined last week to dig for lithium on its own in the state.”
So, going into the mining business on its own is an idea that has obviously been percolating at Tesla for several years now. And hey, Musk’s SpaceX venture just successfully carried three paying customers and a former astronaut to the international space station this week, the same week he opened his company’s largest Gigafactory on the Eastern edge of Austin, Texas, a mile-long facility that was built in roughly a year-and-a-half.
If he can achieve these things, why would anyone doubt he could successfully launch a mining company?