There's little question that Tesla(NASDAQ: TSLA) stock has been a winning investment for shareholders. So far this year, the electric vehicle (EV) maker's stock price has climbed roughly 78%, far outpacing the comparable 13% gains of the S&P 500. The longer term has been even more lucrative, as the stock has soared 853% and 1,930%, respectively, over the preceding five- and 10-year periods.
This significant run-up in recent years has some investors questioning whether the easy money has already been made, with Tesla stock expected to generate much more muted gains in the years to come.
A challenge to that assumption might be found in a recent pronouncement by CEO Elon Musk which suggests that one of Tesla's new ventures will be incredibly lucrative, saying, "It's a license to print money." Even better, the profits from that business could start flowing sooner than expected.
Lithium refining is in high demand
Tesla has been working hard to get its lithium refinery up and running, and the lithium hydroxide it will produce will be used as a component in the battery cells manufactured at Tesla's Gigafactory. Earlier this year, the company revealed that it was expanding its facility in Nevada to include a 100-GWh 4680 cell factory, which will be capable of producing enough batteries to equip roughly 1.5 million light-duty EVs each year. Additional reports suggest Tesla is targeting 500 GWh over the long term, though the company has yet to provide a timeline for the additional capacity.
The refining facility in Robstown, Texas, was originally scheduled to be completed by the end of next year, with lithium production beginning sometime in 2025. The facility is now poised to come online earlier than originally envisioned. In an interview with local media in Corpus Christi, Texas, Tesla's battery materials manufacturing manager, Jason Bevan, provided updated guidance:
We will begin commissioning the assets, roughly the first of next year, and that will continue, in earnest, over the first half of next year. They will start ramping up production the latter half of next year.
Bevan went on to say that there is ample room for growth: "We have property that is well-suited for a future expansion beyond these first two trains, so I think there is ample opportunity for further economic impact beyond just those direct employees that we hire."
Tesla is controlling its destiny
This is an important move for Tesla. Lithium is one of the key elements used in manufacturing electric vehicle batteries, but highly refined lithium hydroxide has been in short supply as demand boomed. It turns out the issue isn't a shortage of the raw metal, but the "limited global capacity to deliver ultra-high-purity battery-grade hydroxide," according to a report by Bloomberg. China accounts for more than half the world's available refining capacity and roughly 40% of the demand.
The resulting shortfall caused refined lithium prices to spike earlier this year, driving up production costs. Prices have since eased but are expected to remain volatile, with another surge in prices expected when the economy recovers and demand for EVs ramps back up. This could ultimately cause a worldwide shortage of refined lithium, and at least one analyst is suggesting the shortfall could hit as early as 2025.
It doesn't seem like a coincidence then that Tesla has accelerated the opening of its refining facility. When completed, this project will greatly increase the lithium refining capacity in the U.S., which currently generates just 2% of the global supply.
Demand for lithium will only increase from here, according to reporting from CNBC. The report cites a report from S&P Global Commodity Insights that forecasts EV sales will more than double by the end of the decade, climbing from 13.8 million in 2023 to 30 million by 2030.
By refining its own supply of lithium hydroxide, Tesla will benefit in two ways. First, the company won't be held hostage by the constraints of supply and demand for the metal, taking control of its own destiny in the process. Furthermore, Tesla will be able to sell off any excess lithium hydroxide it produces -- "minting money" in the process.
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