Tesla Revolution: Electric vehicles to mark decline of gasoline and rise of lithium-ion batteries

Are we seeing the beginning of the end for gasoline? It's doubtful. But, according to Oil Price, "Just a few years ago, we would have scoffed at the idea that electric vehicles could be mainstream anytime soon, or that the global appetite for lithium-ion batteries and mass power storage would be so voracious, and so sudden. Today, no one is scoffing... Tesla has started buying up Nevada and building its battery gigafactory, with competing gigafactories following suit and competing electric vehicle (EV) manufacturers all throwing billions at this fast-moving market that no one has been able to keep up with. Not only has the EV taken its first major leap into the mainstream—most notably indicated by Tesla’s phenomenal advance sales of its affordable Model 3—but it’s gone beyond the mainstream."

Above: Tesla Model 3 (Source: The Verge)

Furthermore, "the Wall Street Journal now reports that the mainstream popularity of electric cars will reduce gasoline demand by 5% to 20% over the next two decades, assuming that EVs gain more than 35% market share by 2035... This has made the commodity [lithium] —described by Goldman Sachs as the 'new gasoline' a prime target... [and] the ‘gigafactory’ state is now the scene of the hottest activity since the California gold rush."

Above: Projected electric vehicle growth powered by lithium-ion batteries (Source: Seeking Alpha via Goldman Sachs)

So how important are those electric vehicle batteries that power a Tesla? According to Bloomberg Businessweek, "Just check out the names of some conference rooms at its new $5 billion gigafactory in Nevada: Lithium, Nickel, Cobalt, Aluminum. They’re used to make lithium ion batteries, and Chief Executive Officer Elon Musk needs unprecedented quantities of the metals to reach an ambitious goal: producing 500,000 electric vehicles a year by 2018." However, it's important to note: "Despite all the buzz about lithium, Musk reminded investors at Tesla’s May 31 shareholder meeting that the metal is 'just the salt on the salad,' accounting for only about 2 percent of the material in Tesla cells."

Above: Tesla's projected metal needs (Source: Bloomberg Businessweek)

So it's not just about lithium. Rather it's worthwhile to look at all metals (see above) required in lithium-ion battery production. And, furthermore it's crucial to examine the future battery chemistries that could dethrone gasoline in the automotive sector. And according to Quartz, "Lithium-ion isn’t a single battery type, but a catchall for a family of formulations that create energy by shuttling lithium, which is the lightest metal, to and fro between a pair of electrodes. In the quarter-century since it was commercialized, lithium-ion has gone from powering Handycams to enabling smart phones, [to] high-end electric cars."

Above: Panasonic 18650 lithium-ion batteries for Tesla Model S (Source: PBS)

However, there is significant buzz surrounding a promising battery chemistry approach: "a silicon anode paired with a current state-of-the-art lithium-ion cathode could almost double the energy density of today’s commercial batteries, thus allowing them to be both much longer-lasting and cheaper. They would not not take us all the way to the envisioned objective, which is making stored electricity equal in price to fossil fuel-produced power, but it would be a game-changing advance." 

Above: A close look at a silicon anode (Source: Quartz; Robert Kostecki/LBL)

Unfortunately, these advances have been difficult and slow-moving: "they are far from a solution that will put silicon anodes in cars. Yet, a small number of startup battery companies say they’re making progress with the technology. As of now, only one commercial lithium-ion battery has any silicon in it–the Panasonic cylindrical cells that go into Teslas. The Panasonic anodes contain an estimated 1% to 3% silicon, a minuscule amount that helps the batteries avoid catastrophic capacity loss, when they fail to form the self-protective SEI layer; but because they have some silicon, they achieve a bit more energy, and Panasonic gets to test out silicon in real-world situations."

Above: Tesla's fleet of electric vehicles (Source: Motor Trend)

So any way you look at it, Tesla Motors [NASDAQ: TSLA] is at the vanguard of this game-changing lithium-ion battery trend. According to the International Energy Agency, Tesla is already leading in lithium-ion battery cost reductions. And, it will lead the world in sheer volume of lithium-ion battery production (at its Gigafactory) as Tesla CEO Elon Musk explained, "In order to produce a half million cars per year…we would basically need to absorb the entire world’s lithium-ion production." And, as evidenced by its forerunner position advancing commercial battery chemistry with silicon, albeit in a small experimental way, it leads the industry in battery technology advances.

Above: Projected battery demand from the top EV makers in the next 4 years (Source: Electrek via Lux Research)

And according to Electrek, Tesla will continue to lead the pack (see chart above) in this fast-growing sector: "A new research report from Lux Research looked into the projected growth of the battery sector for electric vehicles (BEVs and PHEVs) and concluded that the market will rise to $10 Billion in 2020 with six large carmakers led by Tesla accounting for 90% of the demand." Looking at all these factors, it's clear that Tesla Motors is poised to have a major impact in the way car owners will eventually power their respective vehicles. With Tesla maintaining its leadership position in electric vehicle lithium-ion battery development, we might be witnessing the beginning of a real power shift between gasoline and batteries.