When it comes to battery progress, Tesla (NASDAQ:TSLA) is on a roll. Earlier this week, the EV leader reported that it may be on the verge of cutting battery production costs in half. Now the company is considering expanding its empire to include a lithium hydroxide refining plant, which would be located on the Texas gulf coast. According to a letter send to the office of the Texas Comptroller, the facility would be the “first of its kind in North America.” The company has already filed an application with the Comptroller’s office to begin work on the lithium refiner. TSLA stock has been rising since the news broke.
According to CNBC, Tesla could be breaking ground on this latest venture before the end of the year. The outlet reports that production on the plant could begin by the fourth quarter of 2022 pending no legal or regulatory setbacks. If Tesla can successfully obtain the necessary permits, this new facility could provide it with exactly what it needs: A way to process the important materials that it needs to streamline battery production. And as TSLA fans know, the route to the top of the EV race lies in the ability to efficiently produce lost-cost batteries. If Tesla can beat its competitors on this front, it will secure its place as the leader of the EV sector. Let’s take a closer look at what’s going on.
What This Means for TSLA Stock
It’s been an excellent week for TSLA stock. Shares are up 4% for the day and 6% for the week, demonstrating a steady growth trajectory. This news is exactly what investors have been looking for, as it demonstrates that Tesla is focused on conquering one of the most important EV frontiers remaining. More than that, it shows that this goal is achievable. Elon Musk has made it clear that he recognizes the need for Tesla to refine its own lithium. In April 2022, he responded to a tweet of a lithium price chart with the following:
Price of lithium has gone to insane levels! 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.
— Elon Musk (@elonmusk) April 8, 2022
Musk is sometimes hyperbolic but in this case, “insane levels” is an appropriate description. The commodity market volatility of 2022 caused the price of the mineral to almost double. CNBC reports that it has risen 120% this year, citing data from Benchmark Mineral Intelligence. But it also makes sense for Tesla to establish its own refinery for another reason. As the outlet states, “Tesla’s move is also likely a bid to diversify the supply of its lithium and battery production. China controls more than half of the world’s lithium processing and refining, and the United States just 1%.”
It’s clear that establishing a lithium refinery on U.S. soil would be a win/win scenario for Tesla. China’s dominance over the global lithium market has been a point of concern for investors for years. If U.S. companies are able to start mining and refining their own, it would decrease the country’s reliance on China while simultaneously helping EV producers produce more batteries and by default, more cars. If Tesla is successful in this venture, other EV producers will likely follow its lead. But as Tesla has shown the world, being the first company to arrive at a market makes it easy to corner it.
TSLA stock will soar in the coming months if progress on the refinery is made.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
