Is The Tesla Model 3 A Battery Materials Inflection Point?

The Tesla Model 3 driven battery scale-up could turn a materials simmer into a boil-over.

With all of their characteristic fanfare, Tesla shipped its first model 3s this week, and skeptics like me owe true believers like Chris $50. The delivery represents the first 25 of a whopping 500,000+ commissioned cars for which Tesla has already taken deposits and plans to ship by next year. The surprises from Musk’s “handover” party is that there will be 2 versions of the 3 in 2 ranges – a 220 mile city car, and a 310 mile version for longer hauls. The long range version is surely exciting for aspiring Tesla Car Campers, potentially expanding the culture from a handful of people trying to make a point into a legion of people making a really smug and futuristic point.

I’ve been called a Tesla-hater for pointing out that the company has a habit of selling their cult on big promises whose delivery dates are so far in the future that making good on them is never really a near-term problem. Brilliantly, they’ve used the zeitgeist to re-invent promotion, but I digress.

25 cars may as well be 25,000 cars for all it matters to the Tesla faithful. And in his characteristic, mind-and-reality bending fashion, Musk has fooled everyone by being honest. He describes the path up the S curve to a rate of production befitting of a major auto-maker as “production hell,” but doesn’t seem scared of it.

That S curve turning out the way it’s supposed to will mean a flurry of activity at their facility in Freemont, CA and a true trial by fire for the much-hyped battery “Gigafactory” in Nevada.

"When you're going through (production) Hell, keep going."
Tesla S-Curve Graphic Courtesy Bloomberg

Whenever Chris Perry gets stars in his eyes about a hydrocarbon-free future, with everyone humming around in electrical silence, dressed in Star-Trek jumpsuits, I’m quick to remind him that electric cars represent less than 1% of consumer autos right now. Tesla scaling up and delivering their model 3s won’t really make a big dent in the domination of gas and diesel in the consumer vehicle market. But, as I often tell people who get in a twist about the day-to-day price of stocks and single game performance of ballplayers: the daily numbers don’t matter. The trend matters.

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Unknown dog, whose quest for the high ground is about to cause a fundamental landscape shift

Consumer behavior is at the heart of the auto industry. The hundreds of millions that car companies spend on marketing and advertising are the arsenal in an everlasting war for the very core of their target markets’ individual identities. Cars are large investments that become an out sized part of their owners’ lives, projections of their selves. As the saying goes: “wherever you go, there’s your car.” Tesla has managed to capture a great deal of valuable real estate in that coveted heart-share without buying a single television ad. How they achieved it would make for a bestselling marketing book, but the hows and whys are beside the point here: sentiment is infectious and this one’s spreading.
It’s hard to imagine an electric auto more trendy than a Tesla, but that doesn’t isolate the sentiment. The popularity of SUVs started with Land Rovers coming out of the bush and into an urban setting, and competing automakers coming out with their own offerings to stay on trend. Chevy, BMW and Nissan and others are already shipping all-electric consumer cars, and the advent of a better battery pack would give Big Auto an opportunity to make a car with enough range that they would feel comfortable putting their considerable weight of their marketing machines trying to attach it to the sentiment that Tesla has either invented or tapped into.

The consumer auto industry is a multi trillion dollar industry whose continued existence and expansion is the pull that drives another multi-trillion dollar industry for fuel. Oil companies aren’t going to be hitting the panic button in the short term, but it’s important to keep the context that everything comes from somewhere. The day that a consumer can reasonably choose an electric vehicle over a gas one is on the way, and that inflection point is going to represent a fulcrum of enormous movement in the resources space.

The Tesla Model 3 Battery Materials Have to Come From Somewhere

The USGS has the Gigafactory using up 93,000 tons per year of flake graphite when operating at peak production. Last year, the whole of the United States used 24,000 tons of flake graphite. In the same year, the world produced 1.2 million tonnes of graphite from all sources. Prices have remained reasonably steady since 2012.

A Gigafactory operating at scale is going to need more than just graphite. Tesla’s innovative rechargeables are currently bouncing their electrons between a nickel-cobalt-lithium electrode and a mainly graphite cathode. They have to make the packs from scratch before they become economical, and Musk is so confident that his company is going to come out of the other side of “production hell” still kicking, that he’s already teasing the opening of up to 4 more Gigafactories.

New Materials – Proven Paradigm

The legacy-making venture investments are always early buys on a commodity that becomes indispensable. Traditionally, these have been resource investments – the Rockafellers had oil wells before most people had cars – but more modern examples like Google and Facebook worked the same way. Working models of search and social are effectively as irreplaceable in the internet ecosystem and the actual economy as natural materials are in the production chain.

We’re committed to helping our readers make sense of the emerging materials and technologies markets that are developing around this auto shift. We’ll continue to cover client companies Ceylon Graphite and Berkwood Resources who are using this newfound interest in the sector to develop graphite assets. We’re also going to continue to bring readers developments out of the Cobalt space, especially out of the camp in Cobalt, Ontario, where enterprising client companies like LiCo Energy Metals and First Cobalt are reviving an old silver-cobalt camp in a known mining area. Readers can also expect more coverage of the energy metals and cleantech sectors in general. Energy metals are a stubbornly popular trade, and cleantech is bound to have its day in an environment where demand for the world’s hottest car is driven by consumer concern for… well… the environment. Rechargeable batteries can only store energy, they don’t create it. And the innovative companies figuring out how to make that energy cleanly are a whole other piece of the emerging story.

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