Tesla Lithium Refinery: Everything Confirmed So Far

On May 8, 2023, Elon Musk met with Texas Governor Greg Abbott to break ground at the site of Tesla’s new lithium refinery in Corpus Christi. The company plans to invest a total of $375 million to build the facility on the Gulf Coast, as it aspires to produce enough battery-grade lithium for one million vehicles by 2025.

Musk had said in April 2022 that Tesla might need to dive into the lithium-refining business, citing the “insane levels” of lithium costs as his motivation. Fast-forward a year later, and the EV mogul is still determined to move forward with his initiative, even after lithium prices went down considerably this year.

According to filings with the Texas Comptroller’s Office, the Austin-based manufacturer specifically intends to construct a “battery-grade lithium hydroxide refining facility,” and other “facilities to support other types of battery materials processing, refining and manufacturing and ancillary manufacturing operations in support of Tesla’s sustainable product line.”

The lithium refinery, acclaimed by local politicians and described by Elon Musk as a “money-printing” machine carries major significance, and is all set to turn the prominent EV manufacturer into a leading force in the North American lithium industry.

In order to give you the most up-to-date and accurate information possible, the data used to compile this article was sourced from various authoritative sources, including the Institute for Energy Research, SNE Research, and the EPA.

Tesla Is Taking Over The Lithium Business In North America

• The lithium refinery will make Tesla into a lithium mogul in the North American hemisphere.
• Lithium is a highly coveted material and an essential component for EV batteries.
• Tesla will maintain its relationship with its usual vendors to supply its lithium ore.

Although the company dedicated a media day to introducing its refinery project, the latter is still somewhat shrouded in mystery. For one, we have yet to see any official photos. Secondly, although Tesla officials have divulged enough to keep us curious, a few key details are still missing.

For instance, Tesla has omitted to mention where it will source its spodumene, which is the rough form of lithium concentrate that will be processed at the facility. What we do know, however, is that Tesla signed a five-year fixed-price binding agreement with Piedmont Lithium in 2020 to supply its spodumene concentrate, which is a high-purity lithium ore.

The Refinery Will Make Tesla A Leading Force In The Lithium Business

CEO Elon Musk said the Corpus-Christi refinery will produce enough battery-grade lithium for one million electric vehicles by 2025, effectively contributing more than the rest of North American refining capacity combined. This doesn’t mean, however, that Tesla will radically change its current modus operandi and cut off ties with its established partners, explained the CEO. “We intend to continue to use suppliers of lithium, so it’s not that Tesla will do all of it,”.

The company’s main vendors include the likes of Albemarle Corp and Livent Corp. Musk and Co. omitted to indicate the volume of lithium the facility would produce every year. Typically, a lithium-ion EV battery pack will contain about eight kilos (17.6 pounds) of lithium on average.

Why Lithium Is So Coveted By EV Manufacturers

Well, what is lithium, and why all the hype about it, you might ask? Simply put, Lithium (Li) is the lightest metal on the periodic table, and belongs to the group of elements known as alkali metals. Its high reactivity, and propensity to shed electrons, make it an ideal choice for mainstream EV batteries. The light metal can store considerable energy per unit of weight, which translates into more range for your electric vehicle. Hence, lithium-ion batteries are the standard base for all EVs nowadays.

The coveted metal costs about $5,000 to $8,000 per metric ton to produce, and can sell for as much as 10 times that amount, according to the Institute for Energy Research. Of course, there are other alternatives, such as sodium-ion batteries, which are cheaper, but also less reliable, less energy-efficient, and with less energy density.

You Could Live In The Refinery And Not Suffer Ill-Effects, Claims Elon Musk

• The refinery is touted as being 30-percent cheaper to operate
• The facility will manage its by-products, allowing employees to live there without feeling any ill effects, claims Elon Musk

Corpus Christi represents a strategic location for the EV maker, explains. On top of being close to the Gigafactory in Austin, the area is also ripe with talent in the oil and gas refining field, according to Turner Caldwell, who operates as the head of battery raw material and recycling efforts at Tesla. The refining facility is also close to a deep water port, rich with sodium, which will be essential to its daily activities.

A Cheaper And Cleaner Operation

On top of boasting gigantic economic potential, Tesla’s lithium refinery is also touted as being particularly clean. “There’s no toxic emissions or anything — you could live right in the middle of the refinery and not suffer any ill effects,” claims Elon Musk. Typically, the process of refining ore into battery-grade lithium requires crushing raw material, heating it at a high temperature, and mixing it in with acids, which include hydrochloric acid, which is classified as a hazardous air pollutant by the U.S. Clean Air Act.

In its filings, Tesla mentioned that the process will “consume less hazardous reagents and create usable byproducts compared to the conventional process.” Turner Caldwell refrained from divulging the exact chemical process employed at the refinery but did specify that the company would find “beneficial use opportunities” for the byproducts of its lithium.

“Here, what we’ll be using are much more inert reagents. We’ll be consuming soda ash, and sodium carbonate, a very common industrial chemical. We’ll be consuming lime, again a very common industrial chemical, and it’s a much more direct route that consumes 20 percent less energy, all in. It consumes reagents that are 60 percent less costly.”

The overall production process of Tesla’s refinery is also said to be around 30 percent cheaper on a unit-cost basis. As recycled batteries start making their way back to Tesla, the Texas-based refinery will be processing lithium out of black mass, as well as brine and clay operations in North America.

Tesla’s Lithium Refinery Comes With Major Political Implications

• The refinery has received praise and encouragement from U.S. lawmakers.
• The endeavor could redeem Tesla in the eyes of many politicians, who have previously shown concerns regarding its possible ties to CATL
• While the Texas facility will contribute more than the rest of North American refining capacity combined, China still maintains a firm grip over the global lithium business

As previously mentioned, Tesla’s lithium refinery has received positive feedback from local lawmakers due to its major significance. Dr. Kathleen Hogan, who serves as Principal Deputy Under Secretary for Infrastructure at the U.S. Department Of Energy, has praised the facility as “a way to secure a domestic supply chain.” The refinery is notably viewed as a means to shift the balance of power, as China currently controls over half of the world’s lithium processing and refining, while the U.S. only controls one-percent.

The Tesla Texas Refinery Is A Way To Secure A Domestic Supply Chain

The endeavor has been acclaimed by Texas politicians as an emancipating milestone, set to deliver the local sector from the hegemony of foreign entities. Governor Abbott, a Republican, notably shared that sentiment, declaring that “Texas wants to be able to be self-reliant, not dependent upon any foreign hostile nation for what we need”.

This candid tone is reflective of growing discontent regarding the disproportionate industrial power held by other nations, such as China, over the EV realm. These same concerns are the reason why Tesla recently fell under the scope in Congress, when the chair of the House Ways and Means Committee, Representative Jason Smith, wrote a follow-up letter to the CEO, inquiring whether his EV company has contracts, or is considering contracts with Chinese battery maker Contemporary Amperex Technology Co. Limited (CATL), or any other foreign entities of concern.

CATL, the world’s leading battery manufacturer with over one-third of the global market share, is yet another example of China’s dominance over the international e-segment. As a result, the U.S. government recently took draconian measures to withhold federal incentives from any EV company collaborating with the Fujian-based battery mogul, or any foreign entity of concern. This decision correlated with the Tesla Model 3 RWD and Long Range variant. no longer being eligible for any portion of the $7,500 tax credit.

Tesla Model 3 Pricing (Without $7,500 Tax Credit)

(Prices sourced from Tesla)

China Holds A Firm Grip Over The Lithium Business

China’s reign of dominance over the lithium battery industry is closely related to its deep involvement in the lithium business. The People’s Republic is expected to own around 705,000 tonnes of battery-grade processed lithium by 2025, according to UBS. This figure would represent a noticeable spike from the 19,400 tonnes registered in 2022. At that rate, China will effectively control 32 percent of the global lithium supply, another noticeable increase from the 24 percent reported last year.

Being late to the party, the U.S. is trying to find ways to catch up. Tax credits and green energy subsidies from the Inflation Reduction Act (IRA) discount the price of producing lithium by 10-percent, as a way to incentivize companies into investing in the American lithium business.

Currently, China possesses over half of the global lithium refining capacity and is responsible for the refining of 90-percent of rare earth elements, according to the Institute of Energy Research. The country also accounts for eight-percent of the world’s lithium reserves, according to the U.S. Geological Survey.