Piedmont is one of the top lithium processing companies in the United States. They have a current mining site located in North Carolina with 27.9 million tons of lithium supply. Tesla, being a primary electric vehicle maker, needs a consistent lithium supplier for their batteries.
There have been talks recently of Tesla’ s strategic plan to buy out Piedmont Lithium and secure their very own constant source of lithium.
Now one might wonder, Tesla’s already doing fine with their current procurement system for lithium, why do they still need to acquire ownership of Piedmont? Well, according to Ivan from EV Stock Channel on Youtube, there are three primary reasons that could fuel Tesla’s decision to purchase Piedmont entirely.
- Location. Piedmont’s site is in North Carolina, which puts it in quite a close proximity to the Gigafactory in America, thereby reducing transport and logistical costs.
- Supply and present production capacity. Piedmont has a supply of more than 27,000 tons of lithium with the plan of making 22,000 more per year.
- Type of lithium source. Piedmont extracts their lithium from spodumene rocks, which is basically the easiest lithium material to derive lithium hydroxide from. Other deposits such as brine are much harder and more expensive to process. “Piedmont has the ideal source of lithium for low-cost production of lithium hydroxide,” says Ivan.
Piedmont is currently valued at less than $65 million in the market. Assuming that Tesla buys the company for $100 million, and funds the mine operations and chemical processing plant development at $200 million and $400 million, respectively, a total of $700 million would be spent by Tesla as an initial investment.
Now, as soon as everything is operational, Tesla and Piedmont will be able to produce a ton of lithium material at a cost of $4000, and with the 25,000 ton requirement, have a total expense of $100 million.
When compared to a third-party supplier arrangement, a ton of material would cost about $10,000 for bulk purchases, which will cause Tesla to spend $250 million for its annual requirement.
Acquiring Piedmont will save Tesla $150 million a year for production costs. The initial investment will then be returned in just a span of 4 and a half years.
The best takeaway that Tesla has for this business move is that it is not anymore affected by sudden price increases in lithium. This would make Tesla untouchable when it comes to price changes. The company will now have the ability to maintain its prices or lower them depending on the competition status. Other EV companies who are aspiring to beat Tesla but are still under the mercy of sudden changes in the price of lithium will fall instantly behind the race.
However, Piedmont should be just a stepping stone into more partnerships, because the mine in North Carolina can only shoulder the supply of one Gigafactory, specifically the one in Nevada. If Tesla intends to keep this supply security for the company, Elon Musk may have to find more companies to partner up with or better yet, buy.
The Present Supply Chain
From the mine in Greenbushes, Australia, the lithium deposits are shipped to China to be processed into lithium hydroxide. In China, the deposits are transported from the port to the processing facility and back again. The lithium hydroxide is then sent to Sumitomo in Japan, where it is integrated into a cathode. Panasonic will handle the assembly of the actual battery pack, then built into an EV, and then it is shipped to wherever it is being marketed.
There will be a lot of good things to come out if this becomes a reality. When Tesla acquires a mine and a processing plant all for itself, there will be a huge reduction in the company’s carbon footprint, seeing as the transport of materials will be lessened. An overall reduction of manufacturing and production cost will take effect, and along with it, a possible lowering of the cost of an electric vehicle since the battery alone makes up for 25-40% of the total price of an electric car.
Tesla acquiring Piedmont can be the trigger to a domino chain of events that will eventually lead to the realization of Tesla’s vision of a world of sustainable and affordable living. Pretty soon, electric vehicles will be the norm of transportation.