Analysis of Tesla battery supply chain finds 40 percent of materials come from China

by WorldTribune Staff, August 11, 2023

Companies based in communist China account for 40 percent of the materials used in batteries for Tesla’s electric vehicles, a report said.

An analysis by Nikkei Asia of the Elon Musk-owned company’s battery supply chain found that China was the largest supplier of materials for the lithium-ion batteries used in Tesla’s EVs.

Nikkei Asia noted that it worked with Tokyo’s Fronteo, “which uses an original machine-learning algorithm to find data with specific characteristics, to analyze Tesla’s supply chain.”

A supply chain breakdown amid the U.S. and China battle for global hegemony could make it difficult for Tesla to buy batteries. An EV maker faces the risk of production disruptions if a leading supplier of a key component stops shipping the product to the manufacturer, said Mari Yamamoto, a director at Fronteo,.

On Aug. 1, China imposed export controls on some gallium and germanium products.

Related: Chip wars: China restricts exports of rare-earths deemed ‘critical’ for U.S. security, July 21, 2023

China, the world’s top supplier of the two rare earth metals that are used in making semiconductors, introduced restrictions on eight gallium and six germanium products, requiring exporters to apply for licenses covering dual-use items and technologies.

The move is widely seen as a response to U.S.-led restrictions on exports of cutting-edge semiconductor devices to China.

Musk said that Tesla is taking steps to lower its reliance on Chinese parts and materials.

“As we look ahead a few years, a fundamental chokepoint in the advancement of electric vehicles is the availability of battery-grade lithium,” the Tesla CEO said at the groundbreaking ceremony for a Texas lithium refinery in early May. The $375 million facility is designed to produce enough of the battery metal to build about 1 million EVs by 2025.

An analysis of public information included in financial statements and press releases using artificial intelligence identified 13,428 companies believed to supply items for Tesla’s EV production down to “quinary” suppliers (those five steps up the supply chain).

China accounted for 40% of the 42 firms engaged in “nonferrous smelting” excluding aluminum smelters. Chinese companies also held the top share, at 33%, among the 102 suppliers in the “inorganic chemistry” group.

“These figures show Tesla’s heavy dependence on Chinese partners,” the analysis said.

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Overall, U.S. companies account for 22% of the number of Tesla suppliers compared to 17% for Chinese firms, the analysis found.

Chile has the world’s largest lithium reserves, at 36% of the total, the U.S. Geological Survey and the International Energy Agency report. Chile and Australia combined account for 80% of global production of the metal essential in EV batteries. But China is the largest refiner of the metal, with 60% of lithium refining taking place in the country.

Tesla has worked to boost the resiliency of its lithium supply chain. The company buys lithium from suppliers such as Albemarle and Livent of the U.S. as well as China’s Ganfeng, a report Tesla released in 2022 shows.

Tesla has also has started building a lithium refining facility, entering the business dominated by China.

“At the end of May, Musk made a surprise visit to China, the first in three years, and held talks with government officials. While showing his commitment to the Chinese market, Musk is making calculated strategic moves to reduce risk,” the Nikkei Asia analysis said.

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