Tesla Inc (Nasdaq: TSLA) drew the market’s attention on Friday after news reports, citing a document submitted with the Texas Comptroller’s Office, indicated that the leader in electric vehicles (EV) is looking at the option of setting up a lithium refinery for manufacturing batteries (for EV) in Texas in the months ahead. The stock of Tesla closed at $299.68, up $10.42 or 3.60% from its prior close.
Tesla is assessing the viability of a lithium hydroxide refining capacity in Texas. The autonomous vehicle manufacturer stated that the facility will concentrate on the creation of “battery-quality lithium hydroxide.” Furthermore, as per the document submitted to the Texas Comptroller’s Office, it will also be the first company involved in such a venture in North America.
Specifically, the Austin, Texas-headquartered firm intends to process raw ore and convert it into a usable form for manufacturing batteries. The processed ore is planned to be delivered to several Tesla battery manufacturing facilities.
In April, Tesla CEO Elon Musk stated that there is a need for Tesla to venture into lithium refining as raw material costs have increased to exorbitant levels. In particular, as per Benchmark Mineral Intelligence, the price of lithium has surged by 120% in the year to date. Experts believe that Tesla’s planned initiative is also a strategic move to diversify the lithium sourcing process and battery production. Notably, over 50% of the world’s lithium is processed by China. The US accounts for just a 1% share in the lithium processing and refining process.
The document also reveals that the company is also looking at other materials suitable for battery production as well as auxiliary production processes, in favor of the company’s renewable product portfolio.
The company has announced that it will start constructing the factory in the fourth quarter of this year, provided its application receives approval from the authorities. Furthermore, Tesla aims to start commercial operations by the fourth quarter of 2024.
As a note of caution, the company has stated that its project is only in the evaluation stage, and basic development activities have just started. Additionally, Tesla pointed out that no contracts have been inked or discussed in relation to the establishment of production facilities (construction, engineering, or sourcing of materials). Obviously, the company is yet to obtain relevant regulatory clearance.
Musk’s company stated the facility could be established anywhere with access to the Gulf Coast shipping route. In this regard, Tesla stated that it is validating a rival site in Louisiana.
Tesla has also stated that the venture could succeed only with tax breaks from Texas. Therefore, according to the company, investments related to the project will be made only after taking financial and commercial aspects into consideration. This includes the waiver of local property taxes for the construction of the production facility.
Lithium is a crucial metal for batteries that are used in almost everything, including smartphones and electric cars. Considering the strategic significance of rare earth metals and the Chinese upper hand, there are worries that Beijing could try to gain leverage by stopping supplies of lithium and other critical raw materials. Therefore, the US has begun initiatives to step up its rare earth mining and processing capacity to match China.
The news of the lithium processing factory is expected to keep the stock of Tesla slightly bullish in the short term.
The historical price chart indicates that the stock of Tesla has bounced off after testing the support at 270. The next major resistance is only anticipated near 320. Additionally, the stock is trading above its 50-day moving average while the Chaikin money flow indicator is showing a positive reading. Therefore, we anticipate the stock to remain in an uptrend in the days ahead.
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