LSM14: the true impact of Tesla’s Gigafactory

By Emma Hughes
Published: Tuesday, 27 May 2014

Since Elon Musk, CEO of Tesla Motors, announced that he intends to build a US-based $5bn Gigafactory, capable of producing thousands of batteries for electric vehicles (EVs), the critical materials supply chain has come alive with excitement.

Unsurprisingly, this so-called Gigafactory has been one of the main talking points at this year’s Lithium Supply & Markets conference, which took place in Montreal, Canada, in May.

In his opening address, Chris Berry, founder of House Mountain Partners in the US, said that the news has, “breathed life into the critical minerals industry”.

According to Musk’s ambitious plans, the factory would require 25,000 tpa lithium compounds, the battery cathode material, on top of current market volumes. This would fulfil Tesla’s pledge to produce 500,000 lithium-ion (Li-ion) batteries by 2020.

This, Berry said, is the ‘disruption’ the lithium industry has been waiting for.

However, while most at the conference agreed that Tesla’s announcement will be positive for the industry, some were more conservative in their expectations.

Jon Hykawy, president and director of Canada-based research and consultancy firm, Stormcrow Capital Ltd, told IM on the side-lines of the conference that he believes the lithium industry is getting too excited about the Tesla announcement, but this is not really surprising considering the remarkable things Tesla has achieved to date.

Hykawy explained that EVs are expensive by virtue of the fact that the batteries are still expensive, and they are going to remain expensive owing to the scale already built into batteries.

“The decreases in cost associated with the scale that you’d expect from Tesla when it’s firing on all cylinders is going to be fairly muted compared to the decrease in battery costs we’ve already seen,” Hykawy told IM.

“What we need is for fuel costs to move up and battery costs to move down. That combination could move us into an environment when we see the kind of sales that Tesla is hoping for,” he added.



Competition from alternative technologies

During his presentation on opportunities and threats in the lithium industry, Hykawy also outlined that there are other options out there for EV and hybrid vehicle manufacturers.

One of these options is fuel cells, which convert chemical energy from a fuel into electricity through a chemical reaction with oxygen or another oxidising agent.

One company looking at using hydrogen fuel cells in its EVs is Toyota, which says that fuel cells are cheaper to produce and more efficient.

However, Hykawy outlined to IM that while fuel cells come with these advantages, as well as being able to offer a more specific output, they also come with a drawback in that they are not suited to varied output.

“Fuel cells are very good at operating at a specific output, acting as a constant source of power. What you don’t want it to do is to vary the output rapidly, like when you reach a stop light and have to go from standstill to full acceleration,” he told IM.

Hykawy further explained that while others are looking into fuel cells as an option for EVs and hybrids, lithium is almost guaranteed to feature in these vehicles in future.

“The ideal arrangement is for a fuel cell to be attached to a battery to absorb those shocks and effectively give you the advantages you need in a system with a smaller fuel cell, a less expensive fuel cell, one that can handle varied output. This will also protect operating life,” Hykawy explained.

“Whether you see fuel cells coupled to lithium batteries, or just lithium batteries on their own, or lithium batteries coupled to a small gas engine acting as a generator, is almost irrelevant. You’re going to see lithium batteries used in some way,” he added.

“Unless you have another technology that comes in and completely undercuts existing technology, or that far out performs existing technology, then you’re going to use lithium,” he further added.

Lithium-titanate

Further, while many are focusing on the EV revolution as the main driver of lithium demand, the lithium market doesn’t have to wait for the electric vehicle to show up.

According to Hykawy, there is already significant amount of work going into using lithium as a cathode material as well as using lithium-titanate as an anode material, replacing graphite.

“The advantage that gives a battery is that it is capable of producing a lot more power, it also becomes capable of producing charge much more quickly so it can be charged far quicker,” Hykawy told IM.

“You can take some of these lithium-titanate anode batteries from a state of essentially dead-empty to fully charged in about 10 minutes. That gives you a significant advantage in terms of those who are concerned about their EV running out of charge,” he added.

Under a basic calculation, Hykawy said that if you replace all of the graphite in batteries with lithium-titanate, you are basically talking about adding two thirds of current demand to the lithium market.

“This obviously won’t happen overnight, and would simply be too much for the industry to cope with from a demand side, however it would be a ‘nice problem to have’,” Hykawy concluded.