Tesla’s years of investment in battery technology becomes a buffer against rising nickel costs
For years, Tesla has invested heavily in its battery supply chain and strategy. The company was so focused on these efforts that it even decided to design and produce its own batteries, the 4680 cells. Next-generation cells are a crucial part of Tesla’s long-term plan to make electric vehicles more affordable.
Elon Musk has been very open about Tesla’s nickel needs. As a key component of its high-performance batteries, Musk said in 2020 that any company that can supply environmentally friendly nickel to Tesla would be awarded a massive contract. On Battery Day, the CEO also pointed out that Tesla’s nickel-based 4680 batteries would be at the heart of the company’s flagship products, like the Cybertruck.
But while nickel is an essential ingredient in lithium-ion batteries, experts have been predicting a coming shortage for some time. Norwegian energy analysis firm Rystad Energy has estimated that demand will exceed supply for nickel around 2024 and that by 2026 there could be a shortage of the material. This delay appears to have been accelerated by Russia’s invasion of Ukraine.
It should be noted that Russia controls 20% of the industry’s highest quality nickel supply. The country also holds 10% of the world’s nickel supply. So when Russia was hit with sanctions for its invasion of Ukraine, the markets reacted. Nickel prices have risen so much that the London Metal Exchange has canceled trading in the material for more than a week. In a statement to Initiatedauto industry analyst Lauren Fix noted that Russia’s control of nickel could have negative effects on makers of electric vehicles.
“Relying on your enemies to supply you with critical materials is never to your advantage. They have the ability to control the price you pay and can make it harder to get a supply to complete your objectives,” said Fixed.
Tesla is the dominant electric vehicle manufacturer in the market, and for good reason. For years, the company has launched plans to be as immune to market changes as possible. Tesla has built up a nickel supply virtually independent of many market changes by exploiting partnerships with nickel mining companies and nickel producing entities. The company even bought a nickel mine in early 2021, giving itself direct access to the material.
Tesla has also worked extensively on its battery technology, from the 2,170 cells currently being manufactured at Gigafactory Nevada with Panasonic to the 4,680 cells that are currently being ramped up at the company’s Kato Road facility. Tesla’s 4680 batteries were advertised as nickel-based cells, although they feature a number of efficiencies that make them more cost-effective to produce and have a longer life cycle compared to traditional batteries.
Interestingly enough, Tesla isn’t keeping its 4680 battery technology to itself. In an earlier announcement, Panasonic confirmed that it would also produce 4680 batteries, and they have already been validated by the EV maker. Panasonic noted that mass production of the next-generation cells will begin around 2024.
Tesla has also managed to manage the rising cost of nickel by using batteries that don’t use the material at all. According to CEO Elon Musk, Tesla has started to focus on using iron-based batteries for its entry-level vehicles like the Model 3 RWD and Model Y RWD, both produced at Gigafactory Shanghai. The company also mentioned that it had started using manganese for some of its batteries to reduce its reliance on nickel. Finally, Tesla has also launched a recycling program for its nickel-based batteries, which should further help the company’s supply chain in the future.
Tesla is always affected by market changes. The fact that the company has raised the price of its vehicles twice in recent weeks is proof of this. However, a number of experts said Tesla’s forward-looking strategy still positions the company well to continue playing its role as the undisputed leader in the electric vehicle industry. Tien Wong, a technology investor and founder of Connectpreneur, shared his thoughts on the matter.
“Before the war, nickel prices and potential shortages were a huge concern for Elon and the EV industry as a whole. The war will exacerbate these dynamics, resulting in higher prices and more deliveries. slow for electric vehicles. As for Tesla, they’re the market leader right now, so the nickel situation may actually help them versus their competitors in the short term,” Wong said.
*Quotes courtesy of Insider.
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