The New Gasoline: How Tesla Could Spark Lithium Demand [Infographic]

Disclosure: I am an investor in Tesla Motors (TSLA), Panasonic (PCRFY), and Global X Lithium ETF (LIT). I also plan to hold these investments over a long-term timeframe.

I first got intrigued by lithium after PBS News Hour reported: "Have a cordless land-line (remember those)? Or a smartphone? A tablet? Well, they all depend on batteries. Batteries suffuse our lives on an everyday basis, even if we only notice them when they run low on charge. In fact, the 'Low Battery' warning generates enough angst that a rechargeable charger industry has rapidly sprung up and is today thriving. Of course, we may soon need to have rechargeable chargers to recharge the rechargeable chargers once they run low, and heaven help us, we’re 10 minutes away from a traditional outlet… But I digress. My point is very straightforward: We have an insatiable thirst for stored and easily transported power."

Source: PBS News Hour

"The devices that allow us to function would themselves not function without our trusty portable sources of power. Lithium is a crucial ingredient in these batteries and may one day eclipse oil as a source of geopolitical and economic power... Demand for lithium is sure to increase in the coming decades — it’s expected to double over the next ten years — especially with the rise of fully electric vehicles. The poster child of this development is Elon Musk’s Tesla Motors. His multi-billion dollar Nevada 'gigafactory' is slated to produce 500,000 vehicles per year by 2020. Goldman Sachs estimated that this one operation alone could demand 17 percent of the world’s lithium output."

Source: Visual Capitalist

The Economist reported this week that, "Goldman Sachs, an investment bank, calls lithium 'the new gasoline'. Though the Earth contains plenty of lithium, extracting it can be costly and time-consuming, so higher prices may not automatically stimulate a surge in supply. Demand is also on the up. At the moment, the main lithium-ion battery-makers are Samsung and LG of South Korea, Panasonic [battery supplier for Tesla Motors] and Sony of Japan, and ATL of Hong Kong."

Source: The Economist

"J.B. Straubel, Tesla’s chief technical officer, says the firm wants to secure supplies of many battery materials, not just lithium. 'There’s so much hype in the lithium market right now... people look at it as this magical element,' he says... Tesla’s Mr. Straubel, however, foresees at least another doubling in the performance of lithium-ion batteries, and thinks lithium will continue to shape the battery of the future... [and] bigger carmakers also have a growing appetite for lithium. In a recent shift, Toyota has begun offering lithium-ion batteries instead of heavier nickel-metal hydride ones in its Prius hybrid... [also] tougher emissions standards in Europe and America are likely to boost carmakers’ need for lithium."

Source: Energy Storage News

That said, has Tesla positioned itself properly in order to ramp up it’s lithium supply for the Gigafactory? According to Amigobulls, "Tesla of course has to think ahead regarding how it’s going to source the raw materials necessary for its giant battery factories. One of the key raw materials that go into EV [electric vehicle] batteries is lithium. It’s estimated that an average EV battery packs 9lbs of lithium. In fact, EV batteries are the biggest consumer of the world’s lithium."

Source: Amigobulls (via Battery University)

"Now the big problem with Lithium is not so much that it’s a scarce metal (there is plenty of it in the world’s seas and oceans) but… it’s estimated that considerable resources will have to be expended to expand current lithium production to meet future demand as the EV industry matures.” 

Just how big will the lithium market get? This infographic provides some clues...