Tesla signs deal to get key battery component out of China

Tesla fast charging stations (Superchargers) are located in a parking lot.

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Tesla is turning to Mozambique for a key component of its electric car batteries in what analysts say is a first-of-its-kind deal designed to reduce its dependence on China for graphite.

Elon Musk’s company last month signed an agreement with Australia’s Syrah Resources, which operates one of the world’s largest graphite mines in the southern African country. This is a unique partnership between an electric vehicle manufacturer and a producer of the mineral essential to lithium-ion batteries. The value of the deal was not disclosed.

Tesla will buy the material from the company’s processing plant in Vidalia, Louisiana, which sources graphite from its mine in Balama, Mozambique. The Austin, Texas-based electric automaker plans to buy 80% of what the plant produces — 8,000 tons of graphite a year — starting in 2025, according to the deal. Syrah must prove that the material meets Tesla standards.

The deal is part of Tesla’s plan to increase its ability to manufacture its own batteries to reduce its dependence on China, which dominates global graphite markets, said Simon Moores of the British data provider and battery materials information, Benchmark Mineral Intelligence. .

“It starts at the top with geopolitics,” Moores said. “The United States wants to create enough capacity domestically to be able to build (lithium-ion batteries) in the United States. And this deal will allow Tesla to source graphite independently from China.”

Moores said battery production in the United States would reduce some of the questions Tesla faces about its ties to China, where some mines are raising environmental concerns. The automaker has also set up a showroom in the Xinjiang region, where Chinese officials are accused of forced labor and other human rights abuses against predominantly Muslim ethnic minorities.

A message was left seeking comment from Tesla, which has disbanded its media relations department.

The battery industry has faced a shortage of graphite in recent months, Moores said. Graphite stores lithium inside a battery until it is needed to generate electricity by splitting into charged ions and electrons.

It comes as all major automakers rush to launch electric vehicles amid concerns about climate change.

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Tesla makes nearly a million electric cars a year, and battery supply is its biggest constraint, he said.

“They’ve increased their own battery manufacturing capacity,” Moores said, but “they still can’t get enough batteries.”

A new battery plant the company is building in its new hometown of Austin, Texas will bring it closer to self-sufficiency, but Moores said it still buys batteries from other manufacturers, ” and that won’t change this decade.”

For example, Tesla struck a deal with Panasonic to manufacture battery cells at the automaker’s battery plant near Reno, Nevada.

The Syrah deal is part of a broader effort by automakers to secure relatively scarce raw materials for batteries as demand for electric vehicles is expected to rise, said Sam Abuelsamid, principal e-mobility analyst for Guidehouse Insights. .

The deal also brings graphite processed in Louisiana closer to Tesla’s U.S. plants.

“The pandemic has shown us that we have these long, long, long supply chains, and it doesn’t take much to disrupt a supply chain,” said Donald Sadoway, professor of materials chemistry at the Massachusetts Institute. of Technology. . “Someone might all of a sudden say, ‘We’re going to raise the prices’ or ‘We’re going to refuse to ship it’.”

The Tesla deal with Syrah is unlikely to irritate the Chinese government because China has many markets for its graphite, including increased domestic production of electric vehicles, Abuelsamid said.

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China, however, is Tesla’s largest global market. It has a giant factory near Shanghai and sells about 450,000 vehicles a year there, compared to about 350,000 in the United States, Abuelsamid said.

For the Australian mining company, the deal is “crucial” because it has a non-Chinese buyer for its graphite product, Moores said.

The Syrah graphite mine in Mozambique’s northernmost province, Cabo Delgado, is one of the largest in the world, with a production capacity of 350,000 tonnes of flake graphite per year.

Cabo Delgado has faced violence from Islamic extremists in recent years, an insurgency that has recently spread inland from coastal areas to neighboring Niassa province.

The mine is on the main road linking the provinces of Cabo Delgado and Niassa, an artery that was recently upgraded by a Chinese contractor. During a ceremony to reopen the road in December, President Filipe Nyusi called for vigilance so that the road is not taken by insurgents.

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