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The Battery Transition: is Tesla’s Chinese Battery Switch The Start Of Something New?

What’s happening? Tesla is understood to be switching to cheaper Chinese lithium iron phosphate batteries in its Chinese Model 3 cars, signalling a departure from the use of cobalt, an expensive mineral linked to unethical practices. The vehicles built at Gigafactory Shanghai would be the first Teslas not to use Panasonic batteries. LG Chem and CATL have been contracted by Tesla to make the new batteries.

Why does this matter? The Lithium iron phosphate (LFP) batteries Tesla plans to use cost less than the more commonly used lithium nickel manganese cobalt oxide (NMC) chemistry typically seen in EVs.

While the lack of cobalt will grab attention, analysts say the move is not aimed at reducing its use but is based on Tesla’s desire to drive down the cost of vehicles in China. LFP batteries have also been especially popular in China because NMC technology is often the intellectual property of Japanese and Korean companies. The change in battery is, therefore, not expected to be repeated outside of the country.

Saying this, a number of auto players are taking steps to audit their supply chains or recycle cobalt from older batteries. Cobalt-free batteries are also being explored by developers.

While the ethical issues with cobalt, the majority of which is mined in the Democratic Republic of the Congo, are well known, recent developments should have businesses double-checking their supply chains.

While the world is focused on Covid-19, a measles endemic in the DRC has killed 6,000 people, three-times more than the coronavirus and more than past Ebola outbreaks. Reports suggest measles has spread throughout the country, including to the south-east where a large number of cobalt mines are located.

Lateral thought from Curation – A Financial Times article this week noted how mining, as an industry, faced a conundrum with the world transitioning to cleaner energy.

The sector will have to provide the raw materials – such as cobalt and lithium – to facilitate the switch to clean energy. At the same time, it will have to maintain ESG commitments and deliver robust financial performance. Will environmentally minded shareholders give it the leeway to do so?

Against this backdrop, it’s worth drawing attention to Bill Gates’ investment (via Breakthrough Energy Ventures) in sustainable lithium miner Lilac Solutions, which aims to reduce the amount of water needed to extract the metal.   

Further reading:
Mining sector faces energy transition conundrum, Financial Times
Breakthrough Energy Ventures invests in sustainable lithium mining, Curation

 

Nick Finegold is Founder & CEO of Curation Corp, an emerging and peripheral risks monitoring service.

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